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HARVARD LAW LIBRARY 



Rt^vrf AUG 2 9 1922 



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NORTH CAROLINA 
CORPORATION CODE 

ANNOTATED. 



CONTAl>:iNO THE STATUTES AFFECTING PHIVATE CORPORA- 
TIONS AS AMENDED BY THE EXTHA SESSION OP THE GEN- 
ERAL ASSEMBLY OF 1821 AND THE ^CONSTRUCTION OF 
THESE STATUTES BY THE COURTS PRIOR TO JANUARY 
1, 1922, TOGETHER WITH VARIOUS COHPOBATE 
FORMS. 



POU, BAILEY & POU, 

J. L. EMANUEL 

of the Bar of 
RALEIGH, N. C. 



Atlanta 

THE HARRISON COMPANY 

Law Book Publishers 

1923 



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1 

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1 

Copyrighl 19ZZ | 

THE HARRISON COMPANY 1 

I 

AUG 2 9 1922 



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INTRODUCTION. 



The purpose of this work is to contain in a single volume, in 
compact and concise form, the laws relating to the creation and 
internal management of corporations, with the leading eases from 
the North Carolina Supreme Court and from the United States 
Supreme Court, the Circuit Court of Appeals, and the United 
States District Court, decided under these laws. The statutes 
include the amendments made by the Extra Session of the Gen- 
eral Assembly of 1921, The decisions of the courts rendered be- 
fore January 1, 1922, are included. 

The work contains two parts. Fart One includes Chapter 32 
of the Consolidated Statutes relating to the organization and man- 
agement of private corporations, together with certain sections 
from the Chapters in the Consolidated Statutes on Civil Proce- 
dure, Conveyances, Liens and Attachment, which relate to cor- 
porations. Sections not directly related to the organizations of 
corporations or their management, hut which affect corporations 
in a general way, are grouped together. Under this group we 
have arranged the Child Welfare Laws, the laws declaring the 
criminal liability of corporations, their officers and employees, the 
laws setting forth a corporation's duty to its employees, and 
other sections of like nature. 

Following in order are the laws against Monopolies and Trusts, 
the laws governing Banks and Banking, Negotiable Instruments, 
Co-operative Organizations, Drainage by Corporations, Rural 
Communities, Warehouses, the organization of and requisites for 
doing business by Railroads and Insurance Companies, the organ- 
ization of Municipal Corporations, and the Municipal Finance, and 
Taxation. 

Part Two contains various corporate forms and suggestions for 
their use. We have endeavored to give forms for all transactions 
that may arise during the existence of a corporation from itS' 
organization to its dissolution. 

The present North Carolina corporation law was taken from 
the laws of several of the leading industrial states and was adopt- 
ed in 1901. For this reason we have paid particular attention to 
the decisions rendered after that date and have deemed it wise 
not to cite eases decided before that time and encumber the book 
with explanations of the differences between the present and U», 



4 North Carolina Corporation Code 

former law. In a few instances we have cited cases decided under 
the old law that appear to us to be of special importance and not 
in conflict with the present law. It will be noted that the deci- 
sions cited include the construction of North Carolina statutes by 
the Federal Courts as well as the State Court. 

We are greatly indebted to the West Publishing Company, of 
St. Paul, Minn., for allowing us the free use of its reports and 
digests. We have in many instances copied paragraphs from its 
digests and head-notes from its reports verbatim and that com- 
pany deserves the credit for the clear and concise manner in 
which these paragraphs are written. This company also granted 
us permission to refer to its American Digest Classification, the 
Key Number System, in annotating the book by use of its topical 
numbers. Thus the digest of a ease cited here will be preceded by 
a topical number that will refer to cases containing similar points 
decided by the courts of last resort throughout the United States 
and reported and digested by West Publishing Company. These 
references can be used to advantage in connection with the South- 
eastern Reporter Digest, beginning with the fourth volume, the 
Southeastern Reporter beginning with the sixty-third volume, and 
the Decennial Digest. 

We take pleasure in calling the attention of the North Carolina 
Bar to the courtesies extended us by the West Publishing Com- 
pany. 

POU, BAILEY & POU, 
J. L. EMANUEL. 
Raleigh, N. C, January, 1922. 



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TABLE OF CONTENTS. 

PABT I. 

CHAPTEB ONE. CORPORATIONS. 

I'nge 

Art. 1. Dflfinitiono Vt 

Art. 2. Formation 14 

Art. 3. Powers and Restrictions 22 

Art. 4. Directors and OffleerB C-ii 

Art. 5. Capital Stock 66 

Art. 6. Meetings, Elections and Dividends 77 

Art. 7. Foreign Corporations S3 

Art. 8. Dissolution 65 

Art. 9. Execution 98 

Art. 10. Receivers 101 

Art. 11. Taxes and Fees 107 

Art. 12. Reorganization 109 

CHAPTEE TWO. VARIOUS STATUTES AFFECTING CORPORATIONS. 

Art. 1. Criminal Liability of Corporate Otflecrs and Eiiiplovces . 113 

Art. S. Child Welfare 115 

Art. 5. Corporation's Duty to Employees 117 

Art. 4. Honrs of Service for Employees of Carriers 124 

Art. 5. Earnings of Employees iu Interstate Commerce 126 

CHAPTER THREE. MONOPOLIES AND TRUSTS. 

(128-135) 

CHAPTER POUR. BANKS. 

Art. 1. Definitions •- 138 

Art. 2. Creation 139 

Art. 3. Dissolution and Liquidation 144 

Art. 4. Stockholders 148 

Art. 5. Powers and Duties 151 

Art. 6. Offleprs and Directora 163 

Art. 7. Corporation Commisaion 168 

Art. 8. Bank Examiners 172 

Art. fl. Penalties 175 

Art. 10. Industrial Banks ITS 

CHAPTER FIVE. NEGOTIABLE INSTRUMENTS. 

Art. 1. Oenerat Provisions 185 

Art. 2. Form and Interpretation 180 

Art. 3. Consideration 194 

Art. 4. Nogotiation 197 

Art. 5. Rights of Holder 204 

Art. 6. Liability of Parties 210 

Art. 7. Presentmpnt for Pnymcnt 214 

Art. 8. Notice of Dishonor 219 

Art. 9. Discharge 22T 

Art. 10. Bills of Exchange 230 

Art. 11. Acceptance S31 

Art. 12. Presentment for Acceptance 233 

Art. 13. Protest 235 

Art. 14. Acceptance for Honor 237 

Art. 15. Pftvment for Honor 238 

Art. 16. Bills in a Set 239 

Art. 17. Promissory Notes and Checks /■'~ • ^^^ 

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6 North Cabouna Cobforation Code 

chapteb six. co-operative oeganizations. 

Snbcluptar Ona. Bnlldlnc and Iioui AisocUtlonc 

Page 

Art. 1, Organization 248 

Art. 2. Sharetr and Sharebotdera 24S 

Art. 3. Loans 250 

Art. 4. Under Control of Insurance CommiaHioner 2S2 

Art. 5. Foreign ABSociations 254 

Snbcliaptw Two. lAnd ajid I>oiiii Aasoclatloiu. 

Art. 6, Organization and Powers 257 

Subchapter Tbraa. Cndit Unlona. 
Art. 7. Superintendent of Co-Operative Associations and Credit 

Unions 258 

Art. 8. Incorporation of Credit Unions 259 

Art. 9. Powers of Credit Unions 262 

Art. 10. Shares in the Corporation 266 

Art. 11. Members and Officers 267 

Art. 12. Supervision and Control 271 

anbchaptar Font. Oo-Operativo Assoclatloiu. 

Art. 13. Organization of Associations 272 

Art. 14. Stockholders and Officers 275 

Art. 15. Powers and Duties 276 

Snbcbaptei Flva. Oo-Operatlvo Markotlng of Farm Frodncts. 

(278-280) 
CHAPTEB SEVEN. DRAINAGE BY CORPOBATIONS. 

Art. 1. Manner of Organization 291 

Art. 2. Bights and Liabilities in the Corporation 294 

CHAPTEB EIGHT. RURAL COMMUNITIES. 

Art. I. Organized Rural Communities 296 

Art. 2. Establishment of Conveniences in Rural Communities . . 302 

Art. 3. Bond-Issuing Districts Incorporated 302 

CHAPTES NINE. WABEHOUSES. 

Art. 1. Public Warehouses 303 

Art. 2. Leaf Tobacco Warehouses 305 

CHAPTER TEN. RAILROADS. 

(306-313) 

CHAPTER ELEVEN. INSURANCE. 

Subchapter One. Insnrance Department. 

Art. 1. Title and Definitions 318 

Art. 2. Under Supervision of Insurance Commissioner 318 

Art. 3. General Regulations for Insurance 323 

Art. 4. Deposit of Securities 330 

Art. 5. License Fees and Taies 332 

Snbtdiapter Two. Inanrance Companies. 

Art. 6. General Domestic Companies 337 

Art. 7. Guarantif Fund for Domestic Companiee ...... 34Q 

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North Carolina Corpobation Code 7 

Page 

Art. 8. Mutual Insurance Compntiics 3*9 

Art. 9. ABaeBsment Companies 355 

Art. 10. Bond and Investment Companiea— "Blue Sky Law" . . 358 

Art. 11. Fidelity Inaurnnce CompanieB 368 

Art. 12. Promoting and Holding Companies 365 

Art. 13, Bate Making Companiea - . . 367 

Art. U. Real Estate Title Insurance Companies 370 

Art. 15. Foreign Inauranee Companies 371 

Art. 16. RcguiotiOL. of Life Insurance Companies 375 

Snbchaptar Tlir«e. Frateraal Orden and SocletiM. 

Art. 17. Fraternal Orders 3T7 

Art. 18. Fraternal Benefit Societies 380 

Art. 19. General Provisions for Societies . : 398 

CHAPTER TWELVE, MUNICIPAL COBP0BATI0N8. 
Snbcliapt«T One. Orgsnlcation. 

(4(>n.402) 
Snbchaptar Two. Municipal Flnanco. 

Art. 1. General Provisions 402 

Art. 2. Budget and Appropriations 403 

Art. 3, Temporary Loans - 406 

Art. 4. Permanent Financing 4ns 

Art. 5. Restrictions Upon the Exercise of Municipal Powers . . 423 

CHAPTER THIRTEEN. TAXATION. 

SnbcliapteT Ona. Taxation in 0«nflniL 

Art. 1, Tanation of Corporationa by the State 429 

Art. 2. Administration of Tax Laws 430 

Art. S. Taxation Upon Organization or Admission Into State . 430 
Art. 4. . Annual Tax on Continued EiiBtenec; Scliedule "C," Reve- 

nne Act 431 

Sabcbapter Two. Income Tax or Tax on ProSts. 

Art. 5. Short Title and Definitions 441 

Art. B. Impoaition of Tax 443 

Art. 7. Determination of Income 447 

Art. S. Returna 4S4 

Art. 9. Collection and Enforceniout of Tax 457 

Art. 10. Penalties 401 

Art. 11. Revision and Appeal 4(53 

Art. 12. Administration 464 

Art. 13. Miscellaneous Provisions 4(iC 

Snbdiapter Three. Tax on Property or the Ad Valorem Tax. 
(467-468) 

Art. 14 Private Corporations 4n8 

Art. l-"). Puhlip Service Corporations other than Railroads . . . 478 

Art. 16. Railroads 487 

Bnbchapter Four. State Department of Bevenue. 
(.lfia.4fl'<) 

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PART II. 
SUOQEBTIONS AND FOEM S. 

APPENDICES. 

Rules of Procedure in State CourtB 

Rules ot Procedure in Uuited States District Courts 

Dlvialone of United States District Courta 

Charter of Tobacco Growers' Co-operatl¥e Association 
Marketing Agreement Between Growers and Assoclatloas 

Table of Cases 

Table of Comparative Sections 



EXPLANATIONS. 

The topical number appearing before each citation refers to 
'cases containing similar points digested under the American Di- 
gest Classification, the Key-Number System. 



ABBREVIATIONS. 
ITDited States Circuit Courts of Appeals Reports. 
Clark '8 Code ot Civil Procedure. 
North Carolina Code of 1883. 

Extra Session of North Carolina General Assomblj. 
Federal Beporter. 

United States Supreme Court Reports, Lawyers* Editio 
North Carolina Reports. 
North Carolina Constitution- 
North Carolina Revisal of 1905. 
Southeastern Beporter. 
United States Supreme Court Reporter. 
United States Supreme Court Reports. 



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CORPORATIONS. 

ART. 1. DEFINITIONS. 

Section 

De&nitians 1 

ART. 2. FORMATION. 

How Created 2 

CorporatioDB under general law 3 

What corporatioaa ihall iaelude 4 

Requirements as to ccrtitleate of incorporatiOD 5 

When incoiporatoiB become corporation 6 

Ineorporatora act until duectora elected 7 

Pir«t meeting; notice 8 

Death of ineorporatora; vacancy Qlled 9 

Errora or omiaBiouB in certificate of incorporation 10 

Street Railways II 

Security soiling companies 12 

Public parka and drives 13 

Word "trust" in corporate name 14 

Trust companies and the word "trust" ...,,.... 15 

Certain religious, etc., asaoeiatioua deemed incorporated 16 

ART. 3. POWERS AND r'eSTRICTIONS. 

Express powers 17 

Domestic corporations ..'..- 18 

Foreign corporations Ifl 

Actions against railroads 30 

Service by copy 21 

Service by publication 22 

Manner of publication . , . . ■ 23 

Filing complaint, in cases of publication 24 

When service by publication complete 2'5 

Jurisdiction acquired from service 26 

Proof of service ■ . . . . 27 

Voluntary appearance by defendant 28 

Service on foroigu corporations 28 

Vorlflcation by corporation or the state . . . ' 30 

Attachment; in what actions granted 31 

Affidavit must show what 32 

All property liable to attachment • 33 

Levy on intangible property "JW 

Actions by attorney general 35 

Actions by private persons with leave 36 

Actions by nttornej- general to prevent ultra vires ants, etc. ... 37 

Express powers 38 

Probates before oEBcer of interested corporation 39 

By president and attested by treasurer under corporate.seal ... 40 
Probates before stockholders and directors of building and loan asso- 
ciations 41 

Release of corporate mortgages by corporate officers 42 

By president and attested by witness before January, 1900 ... 43 

Proof of corporate articles before officer authorized to probate ... 44 
Corporate name not affiled, but signed otherwise prior to January, 1919w i^I(' 



10 North Cabolina Corporation Code 

Section 

Legal rate of interest 46 

Penalty for usury; corporate bonds may be sold below par .... 47 

Express powers 48 

By-laws 49 

Implied powers SO 

Banking powers not conferred by this act 51 

Amendments before payment of stock 52 

Amendments generally - 53 

Amendments by charitable, educational, penal or reformatory cor- 
porations 54 

Change of location of principal office 55 

Curative act; amendments prior to IdOl 56 

Amendment or repeal of this chapter; a part of all chartera ... ST 

Name must be displayed 56 

Besldent process agent 59 

Corporate conveyances; when void as to torts 60 

Conditional sale contracts 61 

Mortgaged property subject to execution for labor, clerical services, 

and torts 62 

Qas and electric power companies 63 

No title by possession of right of way 64 

No title by poaseasion of public waya 6S 

Use of public highways 66 

Electric and hydro -electric power companies may appropriate high- 
ways; conditions 67 

Acquisition of right of way by contract 68 

Deeds of easements 6ft 

Plats and aubdiviaioua 70 

Deeds of trust and mortgages, real and personal 71 

Conditional sales of personal property 73 

Conditional sales of leases of railroad property 73 

Synopsis of lien law 74 

ART. 4. DIBECTORS AND OFFIOEBS. 

Directors 75 

Officers, agents, and vacancies "76 

Boohs to be audited on request of stockholders 17 

Loans to stockholders 78 

Beports to corporation commission 70 

Secretary of State may call for special reports 80 

Secretary of State to publish list of corporations created .... 81 

Liability of officers failing to make reports or making false reports . SB 

Liability for fraud 83 

Joint and several liability of officers, otc; contribution 84 

Officers paying may enforce exoneration against corporation ... 85 

Assets of corporation first exhausted .86 

ART. 5. CAPITAL STOCK. 

Classes of stock . . ■ 87 

Issuance of capital stock of corporation without par value .... 88 
Stock to be paid in money or money's worth; issue for labor or prop- 
erty 89 

Stock issued for property; how value ascertained; bow stock reported 90 
Construction companies building railroads, etc., may take stock there- 
in; how issued, valued, and reported 91 

Liability for unpaid stock 92 

Decrease of capital stock . ■ ,.-.,, 83 

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NOBTH CABOLINA COBP(HtATION CODE 11 

Section 

Certifle&teB &nd duplicates 94 

Aetioa to compel issu&nee of duplicate eertificatea 95 

Transfer of shares M 

AsaesBmentH, sale, and notice 97 

One corporation maj purchase stock, etc., of another B8 

Matual companies may create stock 99 

ABT. 8. MEETINGS, ELECTIONS, AND DIVIDENDa 

Place of stockholders' and directors' meetings 100 

Meeting called hj three stockholders 101 

Transfer and stock books 102 

Directors to produce books at election 1(13 

Superior court maj require production 104 

Votes stockholders entitled to; eumnlative voting 105 

Stock held by fiduciary, pledgor, life tenant, or corporation .... 106 

Election of directors 107 

Failure to hold election 108 

Jurisdiction of superior court over elections 109 

When dividend declared . ■ 110 

Dividends from profits only Ill 

• ABT. 7. FOBEIGN COBP0BATION8. 

> do business ... 113 



ABT. 8. DISSOLUTION. 

Voluntary, generally 114 

Liability of stockholders • 115 

Voluntary, before payment of stock 116 

Involuntary, at instance of private persons 117 

Involuntary, by stockholders llS 

Involuntary, by attorney general 110 

Forfeiture or dissolution for failure to organize or act 120 

Forfeiture for nonuser by hydroelectric companies 131 

Involuntary, by bankruptcy 1S2 

When franchises forfeited by neglect, etc., corporation dissolved; costs 123 

Service of summons in action for dissolution 124 

Corporate eiistence continued for three years ........ 125 

Diret^tors to be trustees; poners and duties 126 

Jurisdiction of superior court 127 

Injunction; notice and undertaking 128 

Wages for two months lien on assets . . . . ' 129 

Distribution of funds 180 

Debts not extinguished or actions abated 131 

Copy of judgment to be filed with secretary of state; costs .... 132 

ART.' 9. EXECUTION. 

How issued; property subject to execution 133 

Agent must turniah information as to property to officer 134 

Shares of stock subject to; agent must furnish information .... 135 

Debts due corporation subject to; duty and liability of agent . 136 

Violations of three preceding aeotiona miedemeanor 137 

Proceedinga when custodian of corporate books ia a nonresident . ]3§ 

Duty and liability of nonresident custodian r ' • ^f^ 



12 North Cabolina Corf<«ation Code 

abt. 10. beceivee8. 

Section 

Appointment and removal 140 

Powers and bond -141 

Title and inventory 142 

May send for persona and papers; penalty for refusing to answer . 143 

Proof of claim; time limit 144 

Report on claims to court; exciiptiona and jury trial 14a 

Property sold pending litigation 146 

Compensation and expenses . • - 147 

Debts provided for, receiver discharged 148 

Reorganization 149 

AET. 11. TAXES AND FEES. 

Taxes for filing 150 

Pees to secretary -of state and clerk of superior court 151 

Corporate property in receiver's hands liable for taxes 152 

AET. 12. EEOKGANIZATION, 
Corporations whose property and franchises sold under order of court 



New owners to meet and organize . . . . 
Certifleate to be filed with secretary of state . 
Effect on liens and other rights 



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CHAPTER I. 



CORPORATIONS. 



All of Chapter 22 of the Consolidated Statutes and certain sec- 
tions from the Chapters on Civil Procedure, Conveyances, Liens 
and Attachment. 



ART. 1. DEFINITIONS. 

1. Definitions. The following words and phrases where used 
in this chapter, unless differcntjy defined or described, have the 
meanings and references stated below; 

1. "Corporation" refers to a corporation which may be created 
and organized under this chapter, or under any other general or 
any special act. 

OorpoiBttona § 32. InflividualB assoriated togetber in a baBinetB, and 
elaiming to bo a corporation, and exempt from individual liability for the 
contrauts o( the aB«ociation, in order to shield themBelveg from surh liabil- 
ity, must be able to show that this legal entity exists by virtne of aome epe- 
clal or general act oC a legislative body capable of chartcriag-^giving lila 
to — a corporation. There must be n charter.— Hanstein v. Johnson, 112 
N. C. 25?, 17 8. E. 135. 

Note. When this decision was rendered corporations could be created 
either by act of General AMembly or in certain instances by the cterh of the 
anperior court under the general law anthorizing clerks of courts to issue 
charters to certain classes of corporations. In 1901 the authority to grant 
charters was withdrawn from the clerks of the superior court and conferred 
on the secretary of state. An amendment to the constitution withdrew 
from the general assembly in 1913 the power to grant charters, except for 
charitable, educational, penal, or reformatory purposes that are to be and 
remain under the patronage and control of the state. 

2- "Certificate of incorporation" is the instrument filed by the 
incorporators and by which the corporation is formed. 

3. The words "special act" refer to the act of the legislature 
enacted for the purpose of creating the corporation. 

4. The word "charter" means either "certificate of incorpora- 
tion" or "special act," together with all appropriate parts of this- 
chapter and its amendments. 

5. "Court," "superior court," or "judge of the superior court" 
means the judge of the superior court resident in the district or 
holding the courts of the district in which the corporation affected 
has its principal place of business. 

DiyiizcdbvCjOO^Ie 



14 North Caeolina Coeporation Code 

6. "Receiver" as used in this chapter includes receivers and 
trustees appointed by the court, as herein provided. 

C. 8., ■- 1113; Bev., sa. 1136, 1222, 1247; Code, s. 668; 1901, c. 2, se. 7, 74 
111. 

OOTpoiMloiu % 1-30. Judge of superior eourt, haviag jurisdiction, ma; 
appoint receiver to wind up affairs of insolvent corporation. Tiie receive! 
ma;' sue in his name or in the name of the vorporation to collect asseti 
of the corporation and have adjudicated in such suits all legal and equitable 
matters touching the rightt of the corporation, its creditors and debtors.— 
Smsthers v. Western Carolina Bank, 135 N. C. 410, 47 S. E. 893. 

Bile; & Co. V. Sears & Co., 154 N. C. 509, 70 S. £. S97. 

ABT. 2. FORMATION. 

2. How created. Three or more persons who desire to engage 
in any business, or to form any company, society, or association, 
not unlawful; except railroads, other than street railways, or bank- 
ing or insurance, or building and loan associations, may be in- 
corporated in the following manner only (except corporations 
created for charitable, educational or reformatory purposes that 
are to be and remain under the patronage and control of the 
state) : Such persons shall, by a certificate of incorporation, luider 
their hands and seals, set forth — 

1. The name of the corporation. No name can be assumed al- 
ready in use by another domestic corporation, or so similar as to 
cause uncertainty or confusion, and the name adopted must end 
with the word "company," "corporation," or "incorporated." 

OoriKntlaiiB § 49. The defendants have the right not only to use the 
use of its corporate name and when bo acquired, its use will be protected b; 
injunction. — Blackwell's Durham Tobacco Co. v. American Tobacco Co., 14R 
N. C. 367, 593 8. E. 123. 

OoipOi»tlOiu 9 49. A domestic corporation did not acquire b; the mere 
adoption of a corporate name the exclusive right touse the same or euch a 
property right as would be protected b; injunction in the absence of actual 
Qser.— Ibid. 

Ooiporatlons § 664, Where a foreign corjioration and a domestic cor- 
poration have the same corporate name, Ihe latter cannot, it would aeeni, 
sue to enjoin the former from using such name within the state and doing 
business therein, unless the corporate rights of the domestic corporation 
were in existence before the foreign corporation committed the acts against 
which relief is sought.^ — Ibid. 

OorporatiouB § 49. The defendant* have the right not only to use the 
name "The William Bingham School" but also, if they desire, the name 
"Bingham School" together with the statement "Established in 1793."— 
Bingham School v. Gray, 122 N. C. 699, 30 S. E. 304. 

The incorporating act of 18&5 did not have the effect of creating a trade 
mark of the Bingham name and of confining the exclusive right to use it 
in connection with school purposes upon that corporation. — Ibid. 

Nor is it a prohibition upon all others named Bingham, whether of thai 
fftmily or of any other of that same name, against using the name in con 
nection with any school they might establish. — Ibid. 



,db,Cooglc 



North Carolina Cobporation Code 15 

2. The location of its principal office in the state. 
Oorpontlons g 60S. The phrase "principal place of business" and "prin- 

eipal office" are BjnoDymouB. — Roberson v. recti leaf -Johnson Lamber Co., 
153 N. C, 120, 68 8, E. 1064; Oarrett v. Bear, 144 N. 0. 23, 56 B. E. 479; Sim- 
mons V. Steamboat Co., 113 N. 0. 147, 18 S. E. 117. 

3. The object or objects for which the corporation is to be 
formed. 

- Oorpontlons § 696. The fact that a e 
corporate privi Leges does not avoid its 
Hills Co. V. Burns, 114 N. C. 353, 19 3. h. sao. 

4. The amount of the total authorized capital stock, the number 
of shares into which it is divided, the par value of each share, 
the amount of capital stock with which it will commence business, 
and, if there is more than one class of stock, a description of the 
different classes. The provisions of this subsection shall not apply ^ 
to religious, charitable, or literary corporations, unless they desire 
to have a capital stock. If they desire to have no capital stock, 
that fact and the conditions of membership shall be stated. 

Note. If the purpose be to issue shares of stock without par value under 
the Act of 1921, chapter 116, the method hereinafter described in section 
ee should be followed. 

5. The names and postofRce addresses of the subscribers for 
stock and the number of shares subscribed for by each ; the aggre- 
gate of the subscriptions shall be the amount of capital with which 
the corporation will commence business. If there is to be no cap- 
ital stock, the certificate must contain the names and postoffice 
addresses of the incorporators. 

The articles of ajfreement filed with the clerk, and upon which articles 
of incorporation are to be issued, are to contain; The corporation name; the 
business proposed; the place where it is proposed to be rarricd on; the 
length of time desired; the names of the persons who have subscribed; the 
amount of the capital; and the number of shares and the amount of eiich. — 
Wilson Cotton Mills v.BandlemaD Cotton Mills, 115 N. C. 475, EO S. E. 770. 

6. The period, if any, limited for the duration of the corpora- 
tion. 

OorporSitloilS g 37. A corporation cannot endure longer than the time 
pisscribed by its charter, and no judicial proceedings are necessary to de- 
clare a forfeiture for such cause. — Asheville Division, Sons of Temperance 
T. Aston, 92 N. C. 579. 

7. The certificate of incorporation may also contain any provi- 
sion, consistent with the laws of this state, for the regulation of 
the affairs of the corporation, or creating, defining, limiting and 
regulating its powers, directors, and stockholders, or any class or 
classes of the latter. 

DidilzedbyCOO^IC 



16 North Carolina Corporation Code 

C. 8., a. 1114; Bev., b. 1137; Code, a. 677; 1885, cc. 19, 190; 1889, c. 170; 
1891, c. 2S7; 1893, ec. 244, 318; 1897, c. 204; 1899, c. 618; 1901, c. 2, s. 8, 
cc. 6, 41, 47; 1903, c. 45S; 1911, c. 213, s. 1; 1B13, c. 5, s. 1; Conet., Art. 8, 
a. 1; 1920, c. 55. 

3. Corporations under (feneral laws. No corporation shall be 
created nor shall its charter be extended, altered, or amended by 
special act, except corporations for charitable, educational, penal, 
or reformatory purposes that are to be and remain under the 
patronage and control of the state; but the general assembly shall 
provide by general laws for the chartering and organization of 
all corporations and for amending, extending, and forfeiture of 
all charters, except those above permitted by special act. All 
such general laws and special acis may be altered from time to 
time or repealed; and the general assembly may at any time by 
special act repeal the charter of any corporation. 

Article 8, section 1, N, C. Conatitutioii. 

1915, c. 99. In effect January ID, 1917. No cases decided prior to thtkt 
date cited. 

StKtntes g 80. Soction applies only to private corporations, not to pub- 
lie or quasi public corporations, acting as governmental agenciea. — Eome- 
gay T. City ot Qoldshoro, 180 N. C. 441, 105 8, E. 187. 

StatntM g 77. An act whicb applies to all the municipal corporations of 
a named county, including cities, towns, villages, and school districta, is 
not a "special act," within the meaning of the Couatitution. — Ibid. 

of Bchool district not prohibited by 
) N. C. 403, 104 S. E. 887. 

Board of Education v. Board of County Commissioners, 174 N. C. 47, 93 
S. E. 383. 

4. What corporations shall inclnde. The term "corporation," 
a.s used in this article, shall be construed to include all associa- 
tions and joint-stock companies having any of the powers and 
privileges of corporations not possessed by individuals or part- 
nerships. And all corporations shall have the right to sue, and 
shall be subject to be sued, in all courts, in like cases as natural 
persons. 

Article 8, section S, N. C, Constitution. 

The term "corporation" ahall include all aasociationa and joint-stock 
companies having any of the powera and privileges of corporationa not pos- 
sessed by individuals or partnershipa. — Hansteln v. Johnson, 112 N, C. 25S, 

17 8. E. 155. 

6. Beqnirements aa to certificate of incorporation. The certifi- 
cate of incorporation shall be signed by the original stock sub- 
scribers, or a majority of them, and must be acknowledged before 
an officer duly authorized under the laws of this state to take the 



DidilzedbyCoO^IC 



NoETH Carolina Cmipoeation Code 17 

proof or acknowledgment of deeds. The certificate shall then be 
filed in the ofBce of the secretary of state, and there remain of rec- 
ord, and he shall, if it is in aecordance with law, cause it to be 
recorded in his office in a book to be kept for that purpose and 
known as the Corporation Book. Upon the payment of the organ- 
ization tax and fees, the secretary of state shall certify under his 
official seal a copy of the certificate of incorporation and probates, 
which certified copy shall be forthwith recorded in the office of 
the clerk of the superior court of the county where the principal 
ofince of the corporation in this state is, or is to he, established, in 
a book to be known as the Record of Incorporations. The certifi- 
cate, or a copy thereof, duly certified by the secretary of state, or 
by the clerk of the superior court o£ the county in which it is re- 
corded, is evidence in all courts and places, and in all judicial 
proceedings is prima facie evidence of the complete incorporation 
and organization of the corporation purporting thereby to have 
been established. 

C. 8., B. 1115; Bev., a. 1139; Code, ss. 678. 67». 682; 1801, c. 2, a. 9; 1903. c. 
343. 

OorpoiMlona § 16. Where incorporators complied with the requirements 
of the law as to tlie form of the articles, and, after execution, caused them 
to be properly recorded as required, they thereby became a for|>oration, 
though no stock waa over iasued.— Powell Bros. v. MeMullAn Lumber 
Co., 153 N. C. 53, 68 S. E. 920. 

Corporations g 29. A purchaser of land from a corporation cannot ques- 
tion its incorporation beenusc the charter was not registered with the 
proper offlcer, where there waa a valid statute under which it might have 
been organised, and there was a bona fide attempt to organize under the 
statote, coupled with aa actual user of the corporate powers, for eueh a 
corporation h a rfe /ac(o corporation, entitled, aa against iudividuala, 
to exercise all the powera of a corporation de jure. — Claremoot College v. 
Riddle, 165 N. C. 211, 8t S. E. 283. 

OoipoHtlona §32. Certified copies of lettera of incorporation are prima 
facie evidence of anch incorporation, — Marshall v. Macon County Savings 
Bank, 108 N. C. 639, 13 S. E. 182. 

6. When incorporstors become corporation. From the date the 
certificate of incorporation is filed in the office of the secretary of 
state, the stock subscribers, their successors and assigns, are a 
body corporate by the name specified in the certificate, subject to 
amendment and dissolution as provided in this chapter. 

C. 8., s. 1116; Bev., s. 1140; 1901, c. 2, a. 10. 

Oorporatloiu gZ4. Where Incorporatora complied with the requirements 
of the law aa to the form of the articles, and, after execution, caused them 
to be properly recorded as required, they thereby became a corporatioo. 
though no stock was ever isaued or hv-laws ad opted .^Powell Bros, v, Mc- 
Mullan Lumber Co., 153 N. C. 53, 68 S. E. 936. 

Oorporatlona §94. — When a corporation is formed under the general law, 

DKiiiz^dbvCjOogle 



18 North Cabolina Corporation Code 

hy the signing of the articles of agreement and the doe recording thereof, 
the corporators become a body politic for the purposes set forth in the 

agreement.— Benbow v. Cook, 115 N. C. 335, 30 8. E. 453. 

Oorpoiatlons §24. The ai^ceptance of a francbise couferred by statute is 
sufficiently evidenced by the signature of all the stockholders to the 
articles of agreement. — Ibid. 

7. Incorporators act nntil directors elected. Until directors are 
elected the signers of the certificate of iocorporation shall have 
the direction of the affairs of the corporation, and may take 
proper steps to obtain the necessary subscription to stock and to 
perfect the organization of the corporation. 

C. 8., B. 1117; Bev., s. 1141; 1901, c. 2, s. 11. 

Oorporatlons % IBO. The management of the affaire of a corporation nntil 
the directors are elected is vested entirely in the subscribers. — Boushall v. 

Myatt, 167 N. C. 328, 83 S. E. 352. 

Oorpontlons glBO. Under the provision that the persons associated 
shall constitute a corporation from the time of filing a proper certificate, 
and the above section, giving tbe signers of tbe certificate temporary 
powers as directors, it is no objection to the obtaining of a right of waj 
by a street railway that its capital stock has not yet been issued and 
that no money has been paid thereon. — Fayetteville St. By. v. Aberdeen & 
Roekfish W. Co., 142 N. C. 433, 55 8. E. 345. 

8. Firat meeting; notice. The first meeting of every corpora- 
tion shall be called by a notice, signed by a majority of the in- 
corporators, designating the time, place, and purpose of the meet- 
ing, which notice shall be published at least two weeks before 
the meeting, in a newspaper of the county where the corporation 
is established; or the meeting may be called without publication, 
if two days notice is personally served on all the incorporators ; or 
if all the incorporators in writing waive notice and fix a time and 
place of meeting, no notice or publication is required. 

C. S., 8. 1118; Bev., a. 1142; Code, a. 665; 1901, c. 2, a. 18. 

Oorpoiatlons § 194. Tbe compliance with tbe requirement that the first 
meeting of a corporation be called by notice signed by one or more of the 
incorporatOTB, is unnecessary if the meeting is attended by all the stock- 
holders.— Benbow v. Cook, 115 N. C. 325, 20 3. E. 453. 



9. Death of incorporators; vacancy filled. When one or more 
of the incorporators of any corporation die before the corporation 
has been organized pursuant to law, the survivor or survivors may, 
in writing, designate others who may take the place and act in- 
stead of the deceased, in the organization ; and the organization so 
effected by their aid is as effectual in law as if it had been effected 
by all the original incorporators. 

C. 8., ss. Ilia; Bev., s. 1143; 1901, c. 2, s. 36. 



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Nc»TH Cabolina Coepobation Code 19 

10. Xrron or omiBsioiu in oertifloate of iDOorporation. When- 
ever in the certificate of incorporation under any general law there 
18 an error or omission in the recital of the act under which the 
corporation ie created or an error or omission of any matter re- 
quired to be stated therein, it is lawful for the corporation to cor- 
rect the error or supply the omission in the following manner: 
The board of directors shall pass a resolution declaring that the 
error or omission exists and that the corporation desires to correct 
it, and shall call a meeting of the stockholders to take actioK upon 
the resolution. The stockholders' meeting shall be held upon such 
notice as the by-laws provide, and in the absence of such provi- 
sion, upon ten days notice, given personally or by mail. If two- 
thirds in interest of all the stockholders vote in favor of the cor- 
rection of the error or omission, a certificate of their action shall 
be made and signed by the president and secretary under the cor- 
porate seal ; which certificate shall be acknowledged as in the case 
of deeds of real estate, and, together with the written consent in 
person or by proxy of two-thirds in interest of all the stockholders 
of the corporation, shall be filed in the office of the secretary of 
state. Upon the filing thereof, in conformity with this section, 
the certificate of incorporation has the same force and effect as 
if it had been originally drafted in conformity with the amend- 
ment BO made. 

C. 8., s. 1120; Bev., b. 1144; 1901, c. 2, a. 109. 

11. Street railways. Corporations may be organized under the 
provisions of this chapter for the purpose of building, maintaining 
or operating street railways. The term street railways, wherever 
used in this chapter, includes railways operated either by steam or 
electricity, or other motive power, used and operated as means 
of communication between different points in the same municipal- 
ity, or between points in municipalities lying adjacent or near to 
each other, or between the municipality in which is the home 
office of the company and the territory contiguous thereto, and 
such railways may carry and deliver freights. No such railway 
may operate a line extending in any direction more than one hun- 
dred miles from the municipality in which is located *its home 
oflBce, or in any city or town without the consent of the municipal 
authorities thereof. 



Street Railways discussed: Fayetteville Street Railway v., Aberdeen & 
Boefc«sh B. Co., 143 N. C. 423, 55 S. E. 345. 

Denized bvCjOOgIc 



20 NOETH CAEOLINA COBPORATION CODE 

Eminent Ihnnsln glO. It was no objection to o traction company's ei- 
erciao of the power of eminent domain, conferred by its charter that it 
was also authorized to engage in private buainess. — Wadswortb Land Co. 
V. Piedmont Traction Co., 162 N. C. 514, 78 S. E. 297. 

Eminent Domain § 120. The coustruction of a street rnilroad does not im- 
pose an additional servitude on the property fronting on the street so occu- 
pied, though in the original laying out of the street a mere easement was 
taken, and not the fee.— Hester v. Durham Traction Co., 138 N. G. 288, 50 
8. E. 711. 

UnnlAp&I Corporations g 426. The property and f rancliisp of street rail- 
ways laid along a street within the effects and benefits of a local improve- 
ment mav be assessed under the principle relating to abutting owners.— 
City of Durham v. Durham Public Service Co., 182 X. C. 133, 109 S. E. 



12. Security sellinff companies. Corporations may be formed 
under the provisions of this chapter to conduct the business of 
selling securities and bonds of any kind, including its own bonds 
and choses in action, on the partial payment, installment, or other 
plan of payment, and to loan money on mortgage, personal, or 
other security, and to collect interest in advance on the same, 
and to charge a fee of $1 for investigating the loan, but no fee 
shall be charged for a renewal of the loan. A corporation charter- 
ed by another state or by a foreign state, kingdom, or govern- 
ment, having in its charter the power to conduct the business de- 
scribed in this section, may become domesticated in this state in 
the manner and upon the terms and conditions provided in section 
1181 (herein 113} under this chapter ; but such company must also 
file with the secretary of state a statement, verified by its presi- 
dent and secretary, showing that its paid-up cash capital is at 
least ."^100,000 and that it has complied with all the requirements 
of the laws of the state of its creation. The business of such cor- 
poration in this state is restricted to the business described in this 
section. Such corporation is liable to pay the franchise tax im- 
posed by section 7861 {herein 896) under the chapter entitled Tax- 
ation, and also an ad valorem tax on all of its real and personal 
property situate in this state. No foreign corporation domesti- 
cated under this section is required to pay any other taxes or 
license fe«s than those named herein. 



13. Public parks and drives. Three or more persons may be in- 
corporated under this chapter for the purpose of creating and 
maintaining public parks and drives. It is not necessary, however, 
to set forth -in the certificate of incorporation of any corporation 



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North Carolina Corp(«ation Code 21 

created for such purpose the amoimt of authorized capital stock, 
the number of shares iuto which the Bame is divided, the par value 
of such stock, or the amount of capital stock with which it will 
commence business. Any corporation created hereunder shall 
have full power and authority to lay out, manage, and control 
parks and drives within the state, under such rules and regula- 
tions as the corporation may prescribe, and shall have power to 
purchase and hold property and take gifts or donations for sueh 
purpose. It may hold property and exercise such powers in trust 
for any town, city, township, or county, in cohnection with which 
said parks and drives shall be maintained. Any city, town, town- 
ship, or county, holding such property, may vest and transfer the 
same to any such corporation for the purpose of controlling and 
maintaining the same as public parks and drives under such reg- 
ulations and subject to such conditions as may be determined upon 
by such city, town, township, or county. All such lands as the 
corporation may acquire shall be held in trust as public parks 
and drives, and shall be held open to the public under such rules, 
laws, and regulations as the corporation may adopt through its 
board of directors; and it shall have power and authority to make 
and adopt all sueh laws and regulations as it may determine upon 
for the reasonable management of such parka and drives. All 
property owned by it and appropriated exclusively for public 
parks and drives shall not be subject to taxation, and no sueh cor- 
poration shall be liable in damages on account of the construction 
or maintenance of any such parks or drives. 
C. S., e. 1123; 1911, c. 155, bb. 1, 2, 3, 4. 

14. Word "tnist" in corporate name. No corporation may be 
chartered under the laws of North Carolina with the word 
"trust" as a part of its name except those reporting to and under 
the supervision of the corporation commission; nor may any cor- 
porate name be amended to include the word "trust" unless the 
corporation is under sueh supervision. 

C. S., B. 1124; 1915, c. 19B, s. 2. 

15. Trust companies and word "trust." No person, firm, asso- 
ciation or corporation domiciled in the state of North Carolina, 
except corporations reporting to and under the supervision of the 
corporation commission of this state, may therein advertise any 
sign as a trust company or in any way solicit or receive deposits 
or transact business as a trust company, or use the word "trust" 
as a part of his or its name or title. This section shall not prevent 
any individual, as such, from acting in any trust capacity aa here- 



22 North Cabolina Coepobation Code 

tofore. A violation of this section is a miedemeanor, and on con- 
viction the offender shall be fined not exceeding five hundred 
dollars for each offense : Provided, however, that it shall be lawful 
for any corporation incorporated prior to January 1, 1905, to re- 
tain the word "trust" in the name of said corporation, though it 
does not transact a banking business or such other business as 
requires its examination by the corporation commission. 
C. S., a. 1142; 1915, c. 198, a. 3; 1919, e. 108. 

16. Gertain religions, etc., associations deemed incorporated. In 
all cases where a religious, educational or charitable association 
has been formed prior to January first, one thousand eight hun- 
dred and ninety-four, and has since said date been acting as a cor- 
poration, exercising the powers and performing the duties of re- 
ligious, educational or charitable corporations as prescribed by the 
laws of this state, then such association shall be conclusively pre- 
sumed to have been duly and regularly organized and existing as 
a corporation under the laws of this state on January first, one 
thousand eight hundred and ninety-four, and all of its acts as a 
corporation from and after said date, if otherwise valid, are here- 
by declared to be valid corporate acts ; Provided, this act shall not 
apply to any pending litigation. 

C. S,, B. 1125; 1919, c. 137. 

ART. 3. POWERS AND RESTRICTIONS. 

17. Express powers. Every corporation has power — 

1. To have succession, by its corporate name, for the period lim- 
ited in its charter, and when the charter contains no time limit, 
for a period of sixty years. 

Corpontlons g S7. A corporation cannot endure longer than the time 
preseribed by its cbarter, and no judicial proceedings are necessary to 
declare a forfeiture for such a cause, bat for any otber cansa of forfeiture 
a direct proceeding must be instituted bj the sovereign to enforce the 
forfeiture, and it cannot be taken advantage of in any collateral proceed- 
ing. — Asheville Division, Sons of Temperance v. Aston, 92 N. C. 579. 

Oorporatloiu g 37. Although the existence of a corporation be limited 
to a certain number of years, yet it is capable of holding estates in fee. — 
Ibid. 

2. To sue and be sued in any court. 

C. S., B. 1126; Bev., s. 1128; Code, ss. 663, 666, 691; 1893, c. 159; 1901, 
c. 2, B. 1; 1909, c. 507, s. 1. 

Oorporatloiu g 210. A suit against a corporation must be brought in its 
corporate name, and not against its officers or agents. — Young v. Barden, 
90 N. C. 424; Brittain v. Newland, 19 N. C. 363; Mauuey v. Mfg. Co., 39 
N. C. 195. 



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North Carolina Cobforation Code 23 

Btktes g 191. Where a prison ^ard nas injured by falling from & defee- 
trn ladder, he cannot maintain an aetion for damages against the state's 
prison, since such an action would be, in effect, an action against tbe statB 
to recover for a tort of its agents, and on grounds of public policy such 
an aetion cannot be permitted. — Uoody v. State's Prison, 12S N. C. IZ, 38 
& E. 131. 

18. Domeitic oorporatioiu. For the purpose of saing and being 
sued the principal place of business of a domestic corporation is 
its residence. 

C. 8., B. 4G6; Bsv., s. 422; 1903, e. 806. 

fteTporatloiIB §SOS. An aetion by a domestic corporation should have 
been broDght in tbe county in which it had its principal place of business. — 
Atlantic Coast Line B. Co. v. Spencer, 166 N. C. 522, 82 S. E. 851. 

tktrporatlons §503. The phrase "pn 
mens irith the words "principal ofBce. 
153 N. 8. 171, 60 8, B. 50. 

(torporatlons g 503. Every corporation must maintain its principal office 
in some county within the state, which Sxes its residence for the purposes of 
suing and being sued, even though its charter perniits it to have its prin- 
cipal oflGee at a place out of tbe state. — Boberson v. Greenleaf- Johnson 
Lnmb«r Co., 1S3 N. C. 120, 68 a E. 1064. 

Corporatloiu §503. An action ia properly brought by a domestic cor- 
poration in tbe eonnty where it is required to hold its directors' and stock- 
holders ' meetings. — Garrett & Co. v. Bear, 144 N. C. 23, 56 S. £. 479. 

Statute mentioned in Wofford-Fain v. Hampton, 173 N. C. 686, 92 8. E. 
612. 

19. Tanign corporationB. An action against a corporation cre- 
ated by or under the law of any other state or government may be 
brought in the superior court of any county in which the cause of 
action arose, or in which the corporation usually did business, or 
has property, or in which the plaintiffs, or either of them, reside, 
in the following cases : 

1. By a resident of this state, for any cause of action. 

2. By a nonresident of this state in any county where he or they 
are regularly engaged in carrying on business. 

3. By a plaintiff, not a resident of this state, when the cause of 
action arose or the subject of the action is situated in this state. 

C. 8,, e. 467; Bev., s. 423; Code, s. 194; C. C. P., s. 361; 1876-7, c. 170; 
1907, c. 460. 

ChiiiTts §14. A transitory aetion may be maintained against a foreign 
corporation by a nonresident on a cause of action ariBing out of the state, 
the statute having been taken from the statute law of New York, where it 
waa eoDBtrued as not containing any prohibition of such action. — Ledford 
T, Western Union Telegraph Co., 179 N. C. 63, 101 8. E. 533. 

Teini« §6. An aetion for determination of an "estate or interest in real 
property" held properly removed to the county where the property was 
■ituated. — Henrico Lumber Co. v. Dare Lumber i:^o., 180 N. C. 12, 103 S. E. 



sdbyCoO^Ic 



24 North Carolina Corporation Code 

OonrtB % 7. Tbe Snperloi Oonrt la North OaroUna haa Jnrlsdlctlon of an 

action against a North Carolina railroad conipany for injuries in another 
state to a shipment in the hands of the coniicetiiig carrier, under section 
1500 of Eevisal of 1905, declaring that the superior court has original juris- 
diction of all civil actions, where not given to some other court, for the 
action is a transitorv one.— MacGovern & Co. v. Atlantic Coast Line R. 
Co,, 180 N. C. 219, 104 S. E. 534. 

OoTporatlons g 661. A foreign corporation incorporated to do business 
in North Carolina, and domesticated in that state by compliance with its 
laws, may sue therein, though it has no power to do buBincaa in the state 
of its incorporation. — Troy & North Carolina Gold Mining Co. v. Snow 
Lumber Co., 173 N. C. 593, 92 8. E. 494. 

Corporations §666. A foreign corporation may be sued either in tho 
county in which the cause of action arose or the countv in which plaintiff 
resides.— Hannon v. Southern Power Co., 173 N. C. 520, 92 S. E, 353. 

Oorpoisttons § 666. The venue of an action by one foreign corporation 
against another, to recover for trespass and the wrongful removal and sale 
of timber front plaintiff's land, is in the county where the cause of action 
arose, and nob in another county where defendant does not usually do 
business or have property, and where plaintiff does not reside. — Richmond 
Cedar Works v. J. L. Roper Lumber Co., 161 ,\'. C. 603, 77 S. E. 770. 

The superior court docs not have jurisdiction of an action on a contract 
for less than $200.00, brought by a resident of this state against a foreign 
corporation. — Howard v. Mutual Beserve Fund Life Ass'n, 125 N. C. 49, 
34 S. E. 199. 

20. Actions a£:aiii8t railroads. In all actions against railroads 
the action must be tried either in the county whore the cause of 
action arose or where the plaintiff resided at that time, or in some 
county adjoining that in which the cause of action arose, subject 
to the power of the court to change the place of trial as provided 
by statute. 

C. 8., B. 468; Bev., s. 424. 

See eases under preceding section. 

Bemoval to Fedeial Oourt. The Federal Judicial Code, chapter 3, sec' 
tions 28 to 39, which went into effect January 1, 1912, controls'the removal 
of causes from the state to the federal courts. These sections provide that 
no removal can be had unless the amount involved exceeds three thou- 
sand dollars, exclusive of interest. 

To accomplish removal on the ground of diversity of citizenship, the 
petitioner must set out tbe right thereto, duly verified by the removant, or 
some agent or officer authorized lo make verification, and file in the court 
from which removal is desired before the expiration of the time prescribed 
by law for tiling answer, which is twenty days after the return day of the 
summons, or twenty days after service of summons with copy of com- 
plaint. A bond must be given by removant for the sum of five hundred 
dollars, with sufficient surety, to be approved by the court, and conditioned 
that removant shall pay the cost incident to the removal in the event the 
court shall hold that removal is improper. Petition for removal on the 
ground of local prejudice may be filed at any time before trial. Written 
notice of the petition and bond for removal must be given the adverse 
party or parties but the statute does not prescribe the length of time for 
which notice niust be given. 

DidilzedbyCoO^IC 



North Carolina Corporation Code 25 

Cum decideil by the supreme court of North Carolina since the New 
hiiiM Code was adopted January Ist, 1912, are: 

North Carolina Public Service Co. v. Southern Power Co., 180 N. 0. 335, 
IW 8. E. 872. 

Erabioe Motor Co. v. Chevrolet Motor Co., 180 N. C. 61D, 105 S. E. 420. 

Powell V. WatkiDB, 172 N. C. 244, 80 8. E. 207. 
HoUiGeld v. Telephone Co., 172 N. C. 714, 90 S. E. 096. 

Gnrley v. Southern Power Co., 173 N. C. 447, 92 S. E. 262. , 
Pint National Bank v. Pancake, 172 N. C. 513, 90 8. E. 515. 
Patterson v. Champion Lumber Co., 175 N. C. 90, 94 S. E. 692, 
Dills V. Champion Fiber Co., 175 N. C. 49, 94 8. E. 694, 
Cogdill V. Clayton, 170 N. C. 526, 87 8. E. 338. 
Fore V. Sylva Tanning Co,, 175 N. C. 583, 96 S. E. 48. 
Lloyd V. North Carolina R. Co., 162 N. C. 485, 78 S. E. 489. 
Cox V. AtUntic Coast Line B. Co., 166 N. C. 652, g2 S. E. 979. 
Ford V. Pigeon Biver Lumber Co., I5S N. C. 352, 71 S. E. 439. 
Pmitt V. Charlotte Power Co., 165 N. C. 416, 81 S. E. 624. 
Beav. Standard Mirror Co., 158 N. C, 24, 73 8. E. 116. 
Hnrst V, 8outhern By. Co., 162 N. C. S68, 78 8. E. 434. 
Hyder v. Southern By. Co., 167 N. C. 584, 83 8. E. 689. 
Smith V, Harris Granite Quarries Co., 164 N. C. 33a, 80 8 E. 388. 
Brinkley v. John L. Boper Lumber Co., 166 N. C. 501, 82 8. E. 855. 
Herrick v. Norfolk -Southern R. Co., 158 N. C. 307, 73, S. E. 1008. 

21. Service by copy. The summons shall be served by deliver- 
ing a copy thereof in the foUowiag cases : 

1. If tlie action is against a corporation, to the president or 
other head of the corporation, secretary, cashier, treasurer, direc- 
tor, managing or local agent thereof. Any person receiving or 
collecting money in this state for a corporation of this or any other 
state or government is a local agent for the purpose of this section. 
Such service can be made in respect to a foreign corporation only 
when it if&s property, or the cause of action arose, or the plaintiff 
resides, in this state, or when it can be made personally within 
the state upon the president, treasurer, or secretary thereof. 
(Paragraphs two and three of this section do not apply to corpo- 
rations) . 

C. S., 8. 483; Hev,, e. 440; Code, a. 217; C. 0. P., b. 82; 1874-5, e. 168; 1888, 
t. 89. 

Ballro&da gBVi. A railroad company, tliough In the hands of the director 
general of railroads acting by appointment and official proclamation of 
the president, is a proper party to an employee's suit against it and the 
director general, and service of process on a local agent as provided above, 

D,:|,lz.db,.CA>O^Ie 



North Carolina Coeporation Code 



Ooipontloiu g 668. Bervice ean be had on a foreign corporation engsged 
in repairing an electric light and Blreet car plant by service on one who 
had oversight of all the work, and had general charge ot the emplojees of 
the company, and acted as its superintendent of construction. — Clinard v. 
White, 129 N. C. 250, 39 S. E. &60. 

Oorpontlons §668. Under the provision allowing service of summons 
on a foreign corporation when it can be made in the state personally on 
the president thereof, it is immaterial that he is in the state on private 
basiuess, and fhat he is not at the time actually engaged in the service 
of the corporation. — Jester v. Baltimore Steam Packet Co., 131 N. C. 54, iZ 
a. E. 447. 

(In connection with this case consider that of Meuefee v. Riverside Cot- 
ton Mills, 161 N. C, 164. 76 8. E. 741, as reversed by U. S. Supreme Court, 
23T U. 8. 189, 59 Law. Ed. 910, 35 S. Ct. 579.) 

DoipoiktloiiB g 668. Local operator of defendant telegraph company, who 
is in sole charge of defendant's property at the place, who receives and 
■ends messags to and from ships at sea for pay, is defendant's local agent; 
the provision that any person receiving or collecting moneys in the state 
for any corporation shall be deemed a local agent for the purpose of the 
section not being intended to limit, but to extend, the meaning of the term 
"local agent." — Copland v. American De Forest Wireless Telegraph Co., 
138 N. C. 11, 48 S. E. 501. 

fTorporatloiu §668. The legislature may provide for service of process 
on foreign corporations doing business in the state. The statutes pro- 
viding for the service of process on foreign corporations doing busine'ss 
in the state are considered a condition upon which they may do such busi- 
ness, and which they are deemed to have assented to. — Whitehurst v. Kerr, 
153 N. C. 76, 68 S. E. 913. 

Oorporatlons §668. Where a state has establistea by statute a method 
of personal service on foreign corporations doing business therein, reason- 
ably calculated to give full notice, a corporation doing business in the state 
will be taken to have accepted as valid the method provided. — Oliver v. 
U. S. Fidelity & Guaranty Co., 174 N. C. 417, 93 8. E. 948. 

Judgment § 17. A state court is without jurisdiction to render a judg- 
ment against a non-resident defendant in a suit in personam on a notice 
directed to such defendant, where the return recites nonresidence of the 
defendant and service without the state, and defendant did not appear in 
the suit.— Hinton v. Penn Mutual Life Ins. Co., 136 N. C. 18, 35 S. E. 182. 

Oorporatiaiu g 668. Service on a resident director of a foreign corpora- 
tion which has no property within the state and does not do business there- 
in, where the plaintiff is a resident of the state, will bind such corporation. 
and confer jurisdiction upon the state court. — Menefee v. Kiverside Cotton 
Mills, 161 N. C. 164, 76 8. E. 741. BUT UPON A WHIT OF ERROR TO 
THE SUPREME COURT OF THE UNITED STATES THIS CASE WAS 
REVERSED. Chief Justice White delivered the opinion which was with- 
out dissent. He said, "the courts of one state may not, without violating 
the 'due process of law' clause of the fourteenth amendment to the Consti- 
tution of the United States, render a money judgment against a corpora- 
tion organized under the laws of another state upon service on a resident 
director where the corporation has not come into the former state for the 
purpose of doing business therein; has done no business therein; has no 
property therein; and has no qualified agent therein where «-—"-- --- ^- 



DidilzedbyCoO^IC 



North Caxouna Cobpoeation Code 27 

. Meuefee, 237 V. B. 18P, 59 Law. Ed. 910, 

32. Service by pnbUcation. Where the person on whom the 
service of the summons is to be made cannot, after dne diligence, 
be found in the state, and that fact appears by affidavit to the 
satisfaction of the court, or a judge thereof and it in like manner 
appears that a cause of action exists against the defendant in re- 
spect to whom service is to be made, or that he is a proper party 
to an action relating to real property in this state, such court or 
judge may grant an order that the service be made by publica- 
tion of a notice in either of the following cases : 

1. Where the defendant is a foreign corporation, and has prop- 
erty, or the cause of action arose, in the state. 

2. Where the defendant, a resident of this state, has departed 
therefrom or keeps himself concealed therein with intent to de- 
fraud his creditors or to avoid the service of a summons. 

3. Where he is not a resident, but has property in this state, 
and the court has jurisdiction of the subject of the action. 

4. Where the subject of the action is real or personal property 
in this state, and the defendant has, or claims, or the relief de- 
manded consists wholly or partly in excluding him from any 
actual or contingent lien or interest therein. 

5. Where the action is for divorce. 

6. Where the stockholders of a corporation are deemed to be 
necessary parties to an action and their names or residences are 
unknown ; or where the names or residences of parties interested 
in real estate the subject of an action are unknown, if the name of 
at least one of the parties to the action and interested in the subject 
matter thereof is known, and he is a resident of the state, the 
court having jurisdiction may, upon affidavit that after due dili- 
gence the names or residences of such parties can not be ascer- 
tained, authorize service by publication. 

7. Where in actions for the foreclosure of mortgages on real 
estate, if any party having any interest in, or lien upon, such 
mortgaged premises, is unknown to the plaintiff, and his residence 
can not, with reasonable diligence, be ascertained, and such fact 
is made to appear by affidavit. 

8. Where no officer or agent of a domestic corporation upon 
whom service can be made can, after due diligence, be found In 
the state, and such facts are made to appear by affidavit^^his sub- 



itvit,.Thi8 sub- 

sdbyCOO^lC 



28 North Cabouha Cobfobation Code 

section also applies to all summonses, orders to show cause, or- 
ders and notices issued by any board of aldermen, board of town 
or county comniissioners, or by individnals. 

. C. 8., 8. 484; Rev., b. 44S; Code, bs. 218, 221; 1885, e. 3B0; 188S, cr. 108, 
263; 1S»5, c. 3S4. 

ProcBBS § 96. An atSdavit which shows that defendant (cannot, after due 
search, 'be found in the state, that he is a nonresident and has property in 
the state, that the court has jurisdiction of the action, etc!, states facts 
SDfficient for service of process by publication. — Page v. McDonald, 159 
N. C. 38, 74 8, E. 642. 

Process g 96. The provision that where it is made to appear by affidavit 
to the satisfaction of the court that after due diligence, a defendant can- 
not be found within the state, an order shall be made for the pub- 
lication of the process, requires the fact of the inability to find a defendant 
to be established bv affidavit.— Peters Grocery Co. v. Collins Bag Co., 142 
Ji. C. 174, 55 S. E."90. 

Procasa gS6. An affidavit alleging or showing due diligence and that 
defendant cannot be found Ritliin the state is an essential condition prece- 
dent to a valid service by publication, and an affidavit Jn an attachment 
suit which merely alleges that defendants arc residents of another state 
and cannot be found within the state, but fail to show any diligence or 
search whatever, is fatally defective, and a publication based thereon does 
not give the court jurisdiction.— Flint v. Coffin, 170 Federal 873, 100 C. C. 
A. 342. 

Attachment g2S5. Unpaid balances on stock subscriptions due a for- 
eign corporation are property which may be attached in the hands of the 
subscribers and subiected to the pavment of corjHirate debts. — Cooper v. 
Adel Security Co., 122 Ti. C. 463, 30 8. E. 348. 

Attadnnent § 232. Where, in attachment, it appears from the whole rec- 
ord that the statute has been substantially •.'omplled with, the action will 
not be dismissed, nor th,e attachment dissolved. — Best v. British & Ameri- 
can Co., 128 N. C. 351, 38 S. E. 923. 

23. Manner of publication. The order must direct the publi- 
cation in one or two newspapers to be designated as most likely 
to give notice to the person to be served, and for sueh length of 
time as is deemed reasonable, not less than once a week for four 
successive weeks, of a notice, giving the title and purpose of the 
action, and requiring the defendant to appear and answer, or de- 
mur to the complaint at a time and place therein mentioned ; and 
no publication of the summons, or mailing of the summons and 
complaint, is necessary. The cost of publishing in a newspaper 
shall not exceed one dollar and tifty cents an inch of solid type, 
and shall in no case exceed six dollars for the notice. 

C. S., s. 485; Bev,, s. 443; Code, s. 219; 1903, c. 134; C. C- P., c- 84; 1376-7, 
c. 241, e. 3. 

24. Filing complaint, in cases of publication. In all cases 
wherein publication is made, the complaint must be filed before 
the expiration of the time of publication ordered. 

0. 8., a. 486; Bev., s. 442; Code, s. 218. 

DidilzedbyCoO^^IC 



North Carolina Corporation Code 29 

2G: When Berricft by putdlcation complete. In the eases in 
which service hy publication is allowed, the summons is deemed 
served at the expiration of the time prescribed by the order of 
publication, and the party is then in court. 
C. a, s. 487; Kev, 8. 444; Code, a. 227; C C. P., s 88 

26. Jurisdiction acquired from service. Prom the time of serv- 
ice of the summons, in a civil action, or the allowance of a pro- 
visional remedy, the court is deemed to have acquired jurisdiction, 
and to have control of all subsequent proceedings. 

C. S, B. 488; Ber., b. 445; Code, b. 229; C. C. P., s. 90. 

27. Proof of service. Proof of the service of the summons or 
notice must be — 

1. By the certificate of the sheriff or other proper officer. 

2. In case of publication, the affidavit of the printer, or of his 
foreman or principal clerk, siiowing the same. 

3. The written admission of the defendant. 

C. 8., B. 489; Bev., b. 446; Code, b. 228; C. C. P., b. 89. 

28. Voluntary appearance by defendant. A voluntary appear- 
ance of a defendant is equivalent to personal service of the sum- 
mons upon him. 

C. 8., B. 4flO; Bev., b. 447; Code, b. 229; C. C. P., s. 90. 

29. Service on forei|:n corporation. Whenever any action of 
which a justice of the peace has jurisdiction shall be brought 
against a foreign corporation, which corporation is required to 
maintain a process agent in the state, the summons may be issued 
to the sheriff of the county in which such process agent resides, 
and when certified under the seal of his office by the clerk of the 
superior court of the county in which the justice issuing such 
summons resides to be under the hand of such justice, the 
sheriff of the county to which such summons shall be is- 
sued shall serve the same as in other cases and make 
due return thereof. No justice of the peace shall enter a judg- 
ment in such cases against any such foreign corporation unless it 
shall appear that the process was duly served upon such process 
agent at least twenty days before the return day of the same. The 
summons may be made returnable at a time to be therein named, 
not exceeding forty days from the date of such summons; Pro- 
vided, this section shall not apply to actions commenced in a 
county where the defendant has an officer or agent upon^whom 

r„.„z.dbX.003le 



30 North Cabouna Corporation Code , 

process may be served: Provided, that any corporation having no 
process agent in this state, but having an agent who collects money 
for it, said agent shall be deemed a process agent within the 
terms of this section, and that this proviso shall apply to existing 
claims as well as those arising hereafter. Such service can be 
made in respect to a foreign corporation only when it has prop- 
erty, or the cause of action arose, or the plaintiff resides in this 
state, or when it can jiot be made personally within the state upon 
the president, treasurer, or secretary thereof. 
C. S., B. 1494; Rev., 8. 144S; 1907, e. 473; Ex. Sesaion 1920, c. 28. 

Jnstlco of Peaca gSO. Notwithstanding the proviaion that no proceas 
shall be iBaued b; a justice to any countj other than his own, nnleaa a 
bona fide defendant reside out of his county, he may, though no defendant 
reside in the county, acquire jurisdiction of a foreign corporation by service 
on it outside hia county, pursuant to section above, providing that when 
an action, of which a justice has jurisdiction, is brought against a foreign 
corporation, required to maintain a process agent in the state, the snmmous, 
certified in a prescribed manner, to be under the hand of such justice, 
may be issued to the sheriff of the county in which such process agent 
reaides, and auch ahoritC shall aerve it. — Allen-Fleming Co, v. Southern Ey. 
Co., 145 N. C. 37, 58 S. E. 79S. 

JOBtica of Peacs g 84.* Defendant does not make a apecial appearance 
in a justice's court by merely making such appearance before com- 
missioner in taking deposition. — Ibid. 

30. Verification by c<n:poration or the state. When a corpora- 
tion is a party the verification may be made by any officer, or 
managing or local agent thereof upon whom summons might be 
served ; and when the state or any officer thereof in its behalf is 
a party, the verification may be made by any person acquainted 
with the facts. 

C. B., B. 531; Bev., s. 491; Code, s. 358; 1901, e. 610; C. C. ?., s. 117; 1868-9, 
o. 159, B. 7. 

eorporattons g517. When a corporation is a party the verification of any 
pleading may be made by a managing or local agent thereof, as well aa an 
officer.— Godwin v. Carolina Tel. & Tel. Co., 136 N. C. 258, 48 8. E. 636. 

Oorporatlons %bYI. The manager of a foreign corporation is an officer, 
within above section, providing that, when a corporation is a party, verifica- 
tion of a pleading may be by an officer thereof. — Best v. British & American 
Mortgage Co., 131 N. C. 70, 42 S. E. 456. 

SI. AttachmeDt. Id what actions attachment granted. A war- 
rant of attachment against the property of one or more defend- 
ants in an action may be granted upon the application of the 
plaintiff, as specified in this article, when the action is to recover 
a sum of money, or damages for one or more of the following 
canses: 

D,c,lzedbyC00g[c 



NoBTH Cabouna Corporation Code 31 

1. Breach of contract, express or implied. 

2. Wrongful conversion of personal property, 

3. Any other injury to real or personal property, in consequence 
of fraud, or other wrongful act. 

4. Any injury to the person, caused by negligence or wrongful 
act. 

0. 8., «. 798; Bov., b. 758; Cods, b. 347; 18»S, c. 77; 1901, c. 7«; C. C. P.^ 
■. 197. 

Nature and Grounds. 

Attedunant % 7. The plaintiff in a libel action has a right to attach de- 
fendant'H property in actions for any "iniury to the person, eansed by 
negUgenee or wroogfal act"; an injury to a person's reputation being an 
"injury to the person" within statute. — Tisdale v. Eubanka, 180 N. C. 153, 
104 S. E. 339. 

AttachitMiit 8 B. An attachment lies for anliquidated damages arising 
out o( breach of contract.—Walton v. Walton, 178 N. 0. 73, 100 8. B. 176; 
Fouihee v. Owens, 1S2 N. C. 360, Z9 8. E. 770; Judd v. Crawford Qold Uia- 
ing Co., 120 N. C. 397, 27 8. E. 81. 

Form and Bequiaites. 

AttaclutMnt g 146. The duties imposed on an officer issniug the writ of 
attachment cannot be delegated, and hence an attachment should not be is- 
■ned in blank.— Carson v. Woodrow, 160 N. C. 144, 75 S. E. 996. 

Direction to Officers. 



AUaclunait g 146. Such statutes as Bevisal 1905, sections 937, 2939, 
aathorizing constables to serve ordinary court process, do not anthoriie 
them to serve writs of attachment issued by the superior court, whieh 
under section 765, must be directed to a sheriff. — Ibid. 

Property Subject to Attachment. 

Attachment §62. A note is property within Bevisal 1905, section 777, 
providing for service of process upon nonresident by attachment of his 
property within the state and publication of notice. — Armstrong v. Kinsell, 
164 N. C. 125, 80 S. E. 235. 

Attacbmont §64. Proceeds of property sold in claim and delivery pro- 
ceedings on being paid to attorney for plaintiff is subject to attachment as 
plaintiff's property, and is not exempt as being in custodia legis. — First 
National Bank v. Johnston, 161 N. C. 506, 77 S. E. 404. 

Attadl 

a nonresident defendant ii 
any judgmen't. — Johnson i 



Defects or Irregularities in Proceedings. 



t 1 232. Where a writ of nttnchment was issued in blank, ft 
was properly dissolved on motion. — Carson v. Woodrow, 160 N. C. 144,. 7S 
a. E. 996. ^-^ 1 

DiciilzedbyCjOO^lC 



NoBTH Carolina Cobi>oration Code 

! §232. Where in a proceeding by attachment, the whole 
record shows that the statute has been BubBtautiall7 complied with, the 
action will not be dismiBsod nor the Attachment dissolved .—Pago v. Mc- 
Donald, 159 N. C. !8, 74 S. E. 642. 

AttftcIimBiit g ?06. In proper instances, where civil actions are com- 
menced, and service is obtained by attachment on defendant's property, 
1 publication of a notice based on the jurisdiction thus acquired, the 
lance of a summons is unnecessarv.— Jenette v. Hovoy & Co., 182 N. C. 30, 
108 S. E. 301. 

32. Affidavit most show what. To entitle the plaintiff to a war- 
rant of attachment he must show by affidavit to the satiBfactioo of 

the court as follows; 

1. That one cf the causes of action specified in the preceding 
section exists against the defendant. If the action is to recover 
damages for breach of contract, the affidavit must show that the 
plaintiff is entitled to recover a sum stated therein, over and 
above all counterclaims known to him. 

2. That the defendant is either a foreign corporation or a non- 
resident of the state, or a domestic corporation none of whose 
officers can be found in the state after due diligence ; or, if he is a 
a natural person and a resident of the state, that he has departed 
therefrom, or keeps himself concealed thereiti, with intent to de- 
fraud his creditors or to avoid service of summons; or, if the de- 
fendant is a natural person or a domestic corporation, that he or it 
has removed, or is about to remove, property from the state, with 
intent to defraud his or its creditors ; or has assigned, disposed of, 
or secreted, or is about to assign, dispose of, or secrete, property 
with like intent. 

C. S., 8. 799; Rev., s. 759; Code, 8. 349; 1897, c. 476; C. C. P., s. 201. 

AttachmMit §92. An affidavit which shows that defendant is a nonresi- 
dent, and has property in the state, that plnintifF has caase of action ngainat 
blm arising out of contract by which he expressly promised to pay a speci- 
fied sum for professional services rendered at his request, etc., sufficiently 
complies with above section, defining the requisites of an aflidavit for a 
warrant of attachment.— Page v. McDonald, 159 N. 0, 38, 74 S. E. 642. 

Attachm«nt §92. An affidavit for attachment is defective which does 
not definitely and distinctlv state anv fact entitling plaintiff to an attach- 
ment.— Pinch V. Slater, 153 N. C. 155" 67 S. E. 264. 

Source of Information. 

Attachment §100. Affidavit in ntlachment, alleging that defendant la 
about to assign, dispose of, and secrete a sum of money with intent to de- 
fraud creditors, but not setting forth the grounds upou which the belief 
is based, held fatally defective. — First National Bank v. Tarboro Cotton 
factory, 179 N. C. 203, 102 S. E. 195. 

Attacllment glOO. An affidavit for an attachment is fatally defective 
where it alleged that defendant was about to remove his jgiopertv from 
r.«,odb>C.OOglc 



NOBTH Carolina Corporation Code 33 

the Btate with intent to defraud creditors, but not alleging the grounda 
upon which belief was baaed, and that ho was then in another state. — Finch 
V. Slater, 152 N. C. 155, 67 S. E. S84. 

Averment as to Grounds for Attachment. 

Attachment gllO. In an affidavit of attachment, an allegation that de- 
fendants "are about to dispose of their property' with intent to defraud 
plaintiffs" ia but the allegation of a belief, and hence the grounds on 
which it is founded must be set oat. — Judd v. Crawford Gold Mining Co.. 

120 N. C. 397, 27 8. E. 81. 

Averment as to Property of Defendant. 

Attadunent g 116. An affidavit to procure an attachment need not state 
that defendant had property in the state. — Fouahee v. Owen, 122 N. C. 36(r, 

29 8. E. 770. 

Attadunent g IIS. Ad affidavit for attachment against a nonresident not 
personally served, which does not state that be has property within the 
state, confers no jurisdiction against him.— Balk v. Harris, 122 N. C. 64, 

30 S. E. 318. 

Attachment § 116. An affidavit on which a warrant of attachment 
against a nonresident was issued was not defective becanse it did not allege 
that defendant "had property in this state." — Parks v. Adams, 113 N. C. 
473, 18 8. E. 665. 

Defects or Irregularities. 

Attachment g 232. Where service of summons is not made upon defend-* 
ant iti ntt.ichment either personally or by publication, aa required by stat- 
ute, defendant is entitled to have attachment vacated. — Finch v. Slater, 
152 N. C. 155, 67 8. E. 284. 

Attachment §232. Where, in attachment, it appears from tbe whole 
record that the statute has been substantially complied with, the action will 
not be dismissed, nor the attachment dissolved. — Best v. British & Ameri- 
can Mortgage Co., 128 N. C. 351, 38 S. E. 923. 

ClaimB by Third Persons. 

Attachment g 306. Claimant of property attached is required to set forth 
in affidavit or petition facta of ownership. — Patrick-Mostcller Co. v. James 
B. Baker £ Co., 180 N. C. 588, 105 S. E. 271. 

33. All property liable to attachment. The rights or shares of 
the defendant in the stock of any association or corporation, 
with tbe interest and profits thereon, and all other property in this 
state of the defendant, are liable to be attached, levied on, and 
sold to satisfy the judgment and execution. 

C. 8., 8. 816; Rev., s. 776; Code, s 363; C. C. P., 8. 206. 

Attachment g 62. A note ia property within above section, providing for 
service of proceaa upon a nonresident by attachment of his property within 
the state and publication of notice. — Armstrong v. Kinsell, 164 N. C. 125, 
80 S. E. 235. 

Attadunent g64. Proceeds of property sold in claim and delivery pro- 
ceedings oa being paid to the attorney for plaintiff is subject to attaoh- 
ment as plaintifl's property, and is not exempt as being in cuetodia legia. — , 
First National Bank v. Johnston, 161 N. C. G06, 77 8. E. 404. vIOQIc 



34 North Carolina Coepobation Code 

Attudunant ^ U. Money proceeds of the sala of land which belonged to 

wards are subject to nttacliment in the hands of the clerk after the con- 
firmation of the sale. — La Hoy v. Jacobsky, 136 N. C. 443, 48 S. E. 796. 

Attachment g Bl. Tax books in the hands of a sheriff for collection are 
not subject to attachment by a personal creditor of that officer, though 
the amounts to be collected are debts due the sheriff personally, he having 
previously settled his taxes with the proper authorities. — Davie v. Black- 
burn, 117 N. C. 383, 23 8. E. 321. 

Attaduaent J 64, Property in the hands o( the sheriff, under a man- 
date in claim and delivery, which requires him to take the property and de- 
liver it to plaintiff, is not subject to attachment. — Williamson v. Nealy, 
119 N. C. 339, 25 S. E. 953. 

34, Levy on intangible property. The execution of the at- 
tachment upon any such rights, shares, or any debts or other prop- 
erty incapable of manual delivery to the sheriff, shall be made by 
leaving a certified copy of the warrant of attachment with the 
president or other head of the association or corporation, or with 
the debtor or individual holding such property, with a notice show- 
ing the property levied on. This certified copy must be furnished 
to the sheriff by the plaintiff, and the certification must be by the 
clerk of the court from which the warrant was issued, or by the 
justice of the peace who issued it. A person receiving or eollect- 
'ing moneys within this state on behalf of any corporation of this 
or any other state or government is deemed a local agent for the 
purpose of this section. Such service can be made in respect to 
a foreign corporation only when it has property within this state, 
or the cause of action arose or the plaintiff resides in the state, or 
when the service can be made within the state personally upon 
the president, treasurer or secretary thereof. Whenever a writ of 
attachment may be sued out against a nonresident debtor owning 
shares of stock in a resident corporation, and no officer of said 
resident corporation may be found in the county of its principal 
ofiiee upon whom service of said attachment may be made, said 
writ may be served by leaving a certified copy of the warrant of 
attachment with the person in charge of the property of said cor- 
poration in said county, together with a notice showing the stock 
levied upon. 

C. a, B. 817; Rev., s. 777; Code, s. 363; C. C. P., s. 207; 1905, c. 294; 1921, 
e. 94. 

Attachment §62. A note is property within above soi-tion, providing for 
service of process upon a nonresident by attachment of his property with- 
in the state and publication of notice. — Armstrong v. Einsell, 164 N. C. 125, 
80 S. E. 235. 

OoipoiattouB 8 266. Unpaid balances on stock aubscriptions due a for- 
eign corporation are property which may bo attached in the hands of the 



subscribers, and are subject to the payment of corporate debts, within Code, 
... - .,. . - t *■' tion wbar" " * 



1 216, subsection 1, providing for service by publication wbar 



blicatLon 

..J...AA"; 



North Cabolina Corpobation Code S6 

fendaat is a DOnreBident, bnt hu property in the atste, and saetion 363, 
proTiding that an indebtedness in tbe haods of the debtor may be attached. 
—Cooper T. Adel Security Co., 122 N. C. 46S, SO B. £. 348. 

36. Action hj attorn«7-K«i«ral. An action may be brought b; 
the attorney-general in the name of the state, upon his own infor- 
mation or upon the complaint of a private party, against the 
parties offending, in the following eases : 

1. When a person usurps, intrudes into, or unlawfully holds 
or exercises any public office, civil or military, or any franchise 
within this state, or any office in a corporation created by the an- 

. thority of this state ; or, 

2. When a public officer, civil or military, has done or suffered 
an act which, by law, makes a forfeiture of his office. 

S. When any person, natural or corporate, has or claims to have 
or hold any rights or franchises by reason of a grant or other- 
wise, in violation of the provisions of the section of article one of 
the chapter entitled State Lands which declares entries and grants 
not authorized by that chapter to be void and not to constitute 
color of title. 

C. S., a. 870; Rev., 8. 827; Code, s. 607; C. C. P., b. 366; 1911, ce. 195, 201. 

Corporations § 613. The Attorney General can not bring nn action on 
his own motion for the vacation of a corporation's articles, etc., for fraud. 
—Attorney General v. Holly Shelter B. Company, 134 N. C. 481, 46 8. B. 
059. 

36. Action by private person with leave. When application is 
made to the attorney-general by a private relator to bring such an 
action, he shall grant leave that it may be brought in the name of 
the state, upon the relation of such applicant, upon the applicant 
tendering to the attorney-general satisfactory security to indem- 
nify the state against all costs and expenses which may accrue In 
consequence of the action. 

C. S., 8. 871; Rev., s. 828; Code, a. 608; 1874-5, c. 76; 1881, c. 330. 

Corporations § 387. If a New York mining corporntion, doing business 
in North Carolina, had violated its articles of incorporation, the matter 
could not be set np by defendant in company's action in North Carolina, 
to recover land, but it would be necessary that quo warranto be instituted 
by leave of the Attorney (Jen era! .—Troy & North Carolina Gold Uining 
Co. V. Snow Lumber Co,, 173 N. C. 593, 92 S. E. 494. 

37. Actions by attorney-general to prevent ultra virea acts, etc. 
In the following cases the ^ttorney-general may, in the name of 
the state, upon his own information, or upon the complaint of a 
private party, bring an action against the offending parties for 
the purpose of— DigHzedbyCoCWlC 



36 NOBTH CABOLINA CORPORATION CODE 

1. Restraining by injunction a corporation from assuming or 
exercising any franchise or transacting any business not allowed 
by its charter. 

2. Restraining any person from exercising corporate franchises 
not granted. 

3. Bringing directors, managers, Mid officers of a corporation, 
or the trustees of funds given for a public or charitable purpose, 
to an account for the management and disposition of the property 
confided to their care. 

4. Removing such officers or trustees upon proof of gross mis- 
conduct. 

5. Securing, for the benefit of all interested, the said property 
or funds. 

6. Setting aside and restraining improper alienations of the said 
property or funds. 

7. Generally compelling the faithful performance of duty and 
preventing all fraudulent practices, embezzlements, and waste. 

C. S., B. 1143; Rev., B. 1197; Code, ss. 607, 686; 1001, o. 2, s. 107. 

Thia act U applicable only when the purpose is not to dissolve the cor- 
poration by a judicial deciBion, but to preserve it, in order that its useful 
functions maj' be performed, and, at the Bame time, that it ma; not be 
able to abuse ita powers or tTanscend them. — Attorney -General v. Peters- 
burg t Roanoke R. B. Co., 2S N. C. 463. 

S8, Express powers. Every corporation has power — 

1. To make, use, and alter a common seal, 

2. To purchase, acquire by devise or bequest, hold and convey 
real and personal property in or out of the state, and to mortgage 
the same and its franchises. 

C. S., 8. 1126; Rev., s. 1128; Code, as. 663, 666, 691; 1893, c. 15B; 1901. c. 
2, B. 1; 1909, c. 507, s. J. 

Acquisition and disposal of property. 

Corporations § 439. A private corporation may dispose of its property 
without eipreas authority from the legislature. — Benbow v. Cook, 115 N. C. 
324, 20 S. E. 453. 

COTpoTKtiOiu § 856. A foreign corporation created for the purpose of 
mioing and milling gold and other minerals in this state may, if not pre- 
vented by its charter, acquire and dispose^f real property in furtherance 
of the objects of its creation. — Barcello W. Hapgood, 118 N. C. 712, 24 
S. E. 124. 

Oorpoiatloiu § 43S. In thia state where the statutes of mortmain have 
never been adopted, the common-law right to take an estate, in feei inoi- 

, ..i,.,C.oot^[c 



North Cabouna Cobpobation Code 



Corporations may hold land in fee. 

OorpOTatJona g 4S8. Land conveyed to eorpoTation in fee doei not 
revert to grantor or his heirs on the extinction of the corporation. — WilsOD 

V. Leary, 120 N. C. 90, 26 S. E. 630; AsheviUe Division, Sons of Tonper- 
ancB V. Aston, 92 N. C. 578. 

Corporations may acquire property by adverse possession. 

Adverse Posaesglou §10. A railroad ooDipait.v rould acquire title to land 
outside of its right of way bj adverae posscasion for 20 years, tolling entry 
originally because of presumption of a grunt of deed arising therefrom. — 
Cross V. Seaboard Air Line By. Co., 172 N. C. 119. 90 S. E. 14. 

Corporationa § 387. Where land was conveyed to railroad corporation, 
and its acts of sequiriug and holding it was ultra vires, a private person 
could not be heard to nttaek its title on that ground, and no one but the 
atate could complain. — Ibid. 

Corporations may mortgage property and franchise. 

Oorpotatlona § 416. The directors of a corporatiou, unless specially re- 
strained by the charter or by-laws, may borrow money with which to con- 
duct its business, and secure payment by mortgage on corporate property. — 
Wall V. Eothrock, 171 H. C. 388, 88 8. E. 633. 

Oorporatlous § 309. A director of a going solvent corporation may aid 
it with loans of money and take security therefor. — Powell Bros. v. Uc- 
Mullan Lumber Co., 153 N. C. 53, 68 S. E. 926. 

Corporations % 480. One who takes a mortgage upon corporation prop- 
erty for money loaned does so with the knowledge that his lien may be 
displaced in favor of laborer's ticns or judgments for tort and the expenses 
of receivership or of other court proceedings to wind up the corporation 
in cases of insolvency. — Humphrey Bros. v. Buell-Croekei Lumber Co., 174 
N. C. 514, 93 S. E. 971. 

39. Probates before officer of interested corporatioo. In all 
cases when acknowledgment of proof of any conveyance has been 
taken before a clerk of superior court, justice of the peace or no- 
tary public, who was at the time a stockholder or officer in any 
corporation, bank or other institution which was a party to such 
instrument, the certificates of such clerk, justice of the peace, or 
notary public shall be held valid, and are so declared. 

C. S., B. 3345; Rev., s. lOlG; 1907, c. 1003. 8. 1. 

40. By president and attested by treasurer under corporate seal. 

All deeds and conveyances for lands in this atate, made by any 
corporation of this state, which have heretofore been proved or 
acknowledged before any notary public in any other state, or be- 
fore any commissioner of deeds and affidavits for the state of 
North Carolina in any other state, and sealed with the common 
seal of the corporation and attested by the treasurer, are 1: 



38 NostA Carouna Corporation Code 

ratified and declared to be good and .valid deeds for all purposes. 
Where such deeds have been executed for the corporation by its 
president and attested, sealed and acknowledged or probated as 
aforesaid, and the acknowledgment or probate has been duly ad- 
judged sufficient by any deputy clerk and ordered registered, the 
acknowledgment, probate and registration are ratified, and said 
deed is declared valid. Such deeds, or certified copies thereof, 
may be used as evidence of title to the lands therein conveyed in 
the trial of any suits in any of the courts of this state where the 
title of said lands shall come in controversy. 
C. 8., B. 3352; Hev., s. 1028; 1905, e. 307. 

41. Probates before stockholders and directors of building and 
loan associations. No acknowledgment or proof of execution, in- 
cluding privy examination of married women, of any mortgage or 
deed of trust executed to secure the payment of any indebtedness 
to any building and loan association, prior to the first day of Jan- 
uary, one thousand nine hundred and thirteen, shall be held in- 
valid by reason off the fact that the officer taking such acknowl- 
edgment, proof or privy examination was a stockholder or direc- 
tor in said building and loan association; but such proofs and 
acknowledgment and the registration thereof, if in all other re- 
spects valid, are declared to be valid. Nor shall the registration 
of any such instrument ordered to be registered be held invalid by 
reason of the fact that the clerk or deputy clerk ordering the reg- 
istration was a stockholder or divecior in any building and loan 
association whose indebtedness is secured thereby. ' 

C. S., a. 3346; Ex. Seas. 1913, c. 41. 

42. Belease of corporate mortgages by corporate officers. All 
mortgages and deeds in trust executed to a corporation may be 
satisfied and so marked of record, as by law provided for the sat-. 
isfactioQ of mortgages and deeds in trust, by the president, 
cashier, secretary or treasurer of such corporation signing the 
name of such corporation by him as such officer. Where mort- 
gages or deeds in trust were marked "satisfied" on the recorda 
before the twenty-third day of February, nineteen hundred and 
nine, by any president, secretary, treasurer or cashier of any cor- 
poration by such officer writing his own name and affixing thereto 
the title of his office in such corporation, such satisfaction is vali- 
dated, and is as effective to all intents and purposes as if a deed 
of release duly executed by such corporation had been made, ac- 
knowledged and recorded : Provided, however, this validating 



North Carolina Cobfobation Code 39 

provision shall not apply to any suits pending in the cottrts of 
the state on February 23, 1909. 

C. 8., 8. 2597; 1908, e. 283, as. 2, 3. 

43. By president and attested by witnesa befcn-e January, 1900. 
All deeds and conveyances for land in this state, made prior to 
January first, one thousand nine hundred, by the president of any 
corporation duly chartered under the laws of this state, and 
attested by a witness, is hereby declared to be a good and valid 
deed by such corporation for all purposes, and shall be admitted 
to probate and registration and shall pass title to the property 
therein conveyed to the grantee as fully as if said deed were ex- 
ecuted according to provisions and forms of law in force in this 
state at the date of the execution of said deed. This section does 
not apply to suits pending March 8, 1909. 

C. 8.. 8. 3363; 1909, e. 859, a. 1. 

44. Proof of corporate articles before officer authorised to pro- 
bate. All proofs of articles of agreement for the creation of cor- 
porations which were, prior to the eighteenth day of February, 
one thousand nine hundred and one, made before any oiBeer who 
was at that time authorized by the law to take proofs and 
acknowledgments of deeds and mortgages are rati^ed. 

C. S., s. 3356; Rev., s. 102T; 1901, 0..170. 

46. Corporate name not affixed, but signed otherwise prior to 
January, 1919. In al! cases prior to the first day of January, one 
thousand nine hundred and nineteen, where any deed conveying 
lands purported to be executed by a corporation, but the corpo- 
rate name was in fact not affixed to said deed, but same was signed 
by the president and secretary of said corporation, or by the 
president and two members of the governing body of said cor- 
poration, and said deed has been registered in the county where 
the land conveyed by said deed is located, said defective execu- 
tion above described shall be and the same is hereby declared to 
be in all respects valid, and such deed shall be deemed- to be in all 
respects the deed of said corporation. 

C. 8., B. 3354; 1019, c. 53, a. 1. 

46. Legal rate is six per cent. The legal rate of interest shall 
be six per cent per annum for such time as interest may accrue, 
and no more. 

C. S., 8. 2305; Hev., s. 1950; Code, s. 3385; 1895, c. 69; 1876-7, c. 91. 
blMrORt § 1. "Tntorent" is the pretnium allowed bv law for the use of 
mouej'.— MacBachao v. Bank of Columbus, 164 N. C. 24, SO 8. &^ 184. i 



40 North Carolina Corporation Code . 

What law governs. 

Interest g 28. Where money is loaned in Virginia on leal estate aecu- 
rity situate in North Carolina, the security being the basis of the loan, the 
rate of interest is governed by the law of North Carolina, and not by that 
of Virginia.— PaisoB v. Grandy, 128 N. C. 438, 38 8. E. 897. 

Time from which interest runs. 

Int«r«st §39. la figuring interest on a judgment, interest will be al- 
lowed from the first day of the term at which the judgment is rendered. — 
In re Chiaholm's Will, 176 N. C. 211, 96 S. E. 1031. 

Judgments. 

InterMt § 22. Though consent jndgment i: 
auceesBtul party ia entitled to interest. — In i 
211, 96 S. E. 1031. 

IntflTMt § 22. No demand is necessary to set the interest running 

upon a judgment. — Ibid. . 

Computation. 

Interest § 69. Where payments upon a note do not exceed the interest 
due at the time they are ma^e, no new principal can be created at the time. 
It is only when a payment or payments amount to more than the interest 
that a balance mav be struck, and a new principal created. — Bcade t. 
Street, 122 N. C. 301, 30 S. E. 124. 

47. Penalty for usury; corporate bonds may be sold below par. 
The taking, receiving,, reserving or charging a greater rate of 
interest than six per centum per annum, either before or after the 
interest may accrue, when knowingly done, shall be a forfeiture 
of the entire interest which the note or other evidence of debt 
carries with it, or which has been agreed to be paid thereon. 
And jn case a greater rate of interest has been paid, the person 
or his legal representatives or corporation by whom it has been 
paid may recover back twice the amount of interest paid, in an 
action in the nature of action for debt. Hn any action brought in 
any court of competent jurisdiction to recover upon any such 
note or other evidence of debt, it is lawful for the party against 
whom the action is brought tO'plead as a counterclaim the pen- 
alty above provided for, to wit, twice the amount of interest paid 
as aforesaid, and also the forfeiture of the entire interest. Noth- 
ing contained in the foregoing section, however, shall be held or 
construed to prohibit private corporations from paying a com- 
mission on or for tiie sale of their coupon bonds, nor from sellinst 
such bonds for less than the par value thereof. This section shall 
not apply to contracts executed prior to February twenty-first, 
one thousand eight hundred and ninety-five. 

C. 8., s. 2306; Bev., s. 1951; Code, s. 3836; 1896, c. 69; 1903, c. 154; 187G-7, 
c. 91. 

DiyilzcdbvCOO^IC 



North Carolina Cobporation Code 41 

no cases seem to have arisen under the past of the 
section allowing corporations to sell bonds below. par 
and pat a commission on the sales. 

Llmltstlona of Actions g49. The rule tliat a statute of limitationH doet 
not begin to run on open, mutual running aet^ounta, except from the last 
item in the account, applies to an action to recover a penalty for usury. — 
English Lumber Company v. Wachovia Bank & Trust Co., 179 N. C. 211, 
102 8. E, 205. 

UsiUT g 18. A commission charged for the purpose of securing more than 
6 per cent iuterest in addition to a charge of six per cent, interest consti- 
tutes TiBury. — Ibid. 

TTsnry gl. "Usury" is s profit greater than the lawful rate of interest, 
intentionally exacted as a bonus for the forbearance of an existing indebt- 
edness or a loan of money, imposed upon the necessities of borrower in a 
transaction where money is to be returned at all events. — Moulc v. Goldstein, 
172 N. C. 516, 90 S. E. 519. 

tTBOxy g 65. A eommlSBion, in addition to the legal rate charged for 
obtaining a loan from a third party, does not make the transaction nsu- 
rious.^Savings Loan ft Trust Co. v. Yokley, 174 N. C. 573, 94 S. E. 102. 

nsniT gl40. Where plaintiff was compelled to pay more than 6 pet 
cent, for a loan from defendant bank, he was not in pari delicto with the 
bank and could recover the penalty, thou^ be was a director of the bank 
and a member of its loan committee. — MacBackan v. Bank of Columbus, 164 
N. C. 24, 80 S. E. 184. 

Unuy §11. There are, generally speaking, four elements of usury: A 
loan or forbearance of moufv, either expreas or implied; an understaiKiiiig 
that the principal shall be or may be returned; that for such loan or for- 
bearance a greater profit than is authorized by law shall be paid or agreed 
to be paid; and that the contract be entered into with an intention to vio- 
late the law.— Planters ' National Bank v. Wysong ft Miles, 177 N. C. 380, 
99 S. E. 199; Ector v. Osborne, 179 N.-C. 667, 103 S- E. 388. 

Usury g 134. Where an usurious rate of interest on money has been paid 
by the borrower of money, the statutory penalty is double the amount of 
the usury, but where it is only charged, and not collected, the statute elim- 
inates the usury and forfeits the interest on the amount of the loan. — 
Hagan v. Stephens, 178 N. C. 101, 100 S. E. 196. 

NOTE. Section 2482 of the Consolidated Statutes allows 10%, in lieu of 
interest, to be added to the price of supplies furnished for agricultural 
purposes. And section 2485 allows a commission of 109'r, in lieu of interest, 
on money advanced for agricultural purposes. 

48, Express Powers. Every corporation has power : 

1. To elect and appoint, in such manner as it determines to be 
proper, all necessary officers and agents, fix their compensation 
and define their duties and obligations. And when there de- 
volves upon an oflRcer or agent of a corporation such duties and 
responsibilities that a financial toss v4^ould result to the corporation 
from the death and consequent loss of the services of such officer 
or agent, the corporation has an insurable interest in, and the 
power to insure the life of, the officer or agent for its benefit. 

2. To conduct business in this state,- other states, the -Diatriat 



(L.OOQ Ic 



Tlttt 

■gtc 



42 North Carolina Corporation Code 

of Columbia, the territories, dependeocies and colonies of the 
United States, and in foreign countries, and have oflices in or out 
of the state. 

3. To make by-laws and regulations, consistent with its charter 
and the laws of the state, for its own government, and for the due 
and orderly conduct of its affairs and management of its property. 

4. To wind up and dissolve itself, or be wound up and dissolved, 
in the manner hereafter mentioned. 

C. a, 8. 1126; Bav., b. 1128; Code, sb. 663, 666, 691, 692, 693; 1893, c. 
169{ 1901, c. 2; b. 1; 1009, e. 507, a. 1. 

Note. Statute of Limitations apply to individuals and cor- 
porations alike. 

For a long time it was held that a nonresideDt coTporation could not buc- 
eeBsfuUy plead the Statute of Limitations, notwithstanding the fact that it 
might have had an agent reBident at all times within the state, might own 
property in the state and constantly engage in busineaB in the state. Wil- 
liams V. B. A L. AsBii., 131 N. C. 267, 42 S. E. 607; Green v. Ins. Co., 139 
N. C. 309, 51 S. E 887; Alpha Mills v. Eng. Co., 116 N. C. 797, 21 S. E. 917. 
But in 1910 our Supreme Court overruled this line of derisions nnd held that 
foreign corporations which had complied with section 1243 of the Eevisat 
in maintaining an agent in this state upon whom process could be served 
and public service corporations doing business in this state might plead the 
statute of limitations. The test of availability to plead is whether the 
corporations are amenable to the process of our stats courts. Volivar v. 
Cedar Works, 152 N. C. 656, 68 8. E. 200, reversing the same case in 153 
N. C. 34, 67 S. E. 42. In the last Volivar case the court seems to hold that 
the statutes of limitation being in the nature of a privilege or amnesty and 
a defense to prosecutions could not be permitted to domestic corporatioua 
and denied to foreign corporations when the latter had at alt times an agent 
in this state upon whom process could be served. And it rites R. R. v. 
Green, 216 V. S. 400. This case holds "a foreign railway corporation which 
has come into the state in compliance with its laws and has therein ac- 
quired property of a fixed and permanent nature, upon which it has paid 
all taxes levied by the state, is a person within the jurisdiction of the 
state and as such is protected by the 'equal protection of law clause' of 
-the fourteenth amendment to the Constitution of the United States." Jus- 
tice Day, delivering the opinion of the Supreme Court, quoted from the for- 
mer decision "the inhibition of the amendment that no state shall deprive 
any person within its jurisdiction of the equal protection of its law vras 
designed to prevent any person or class of persons as being singled out aa 
special subjects for discriminating or hostile legislation." "In the dea- 
ignation of persona there is no doubt that private corporations are in- 
cluded." "We therefore reach the conclusion that the corporation plaintiff, 
under the conditions which we have detailed, is, within the meaning ot the 
fourteenth amendment, a person within the jurisdiction of the state of 
Alabama, and entitled to be protected against any statute of the state 
which deprives it of the equal protection of the laws." 

Note. Creditor may follow assets. 

"There is no statute of limitation which protects either stockholders or 
directors who receive the capital and assets of the corporation with notice 
by the pending suit of a claim of the plaintiff. In the case of Long v. 
Miller, 93 N. C. 233, it was held that even though a contract sued upon 



North Carouna Corpobation Code 48 

waa barred by the statute, yet the creditor could follow the funda placed 
ID the hande of the trustee to secure such indebtedneas. To the same pur- 
port are F&ison v. Stewart, 112 N. C. 332, 17 S. E. 1S7, Baker v. Brown, 161 
N. C. 12, 65 S. £. 520; and many other casea. Both the directors and stock- 
holders of the company received and held the capital distributed among 
them in traat and for benefit of the creditors. 

"The cause of action in this ease for the recover; of assets of the cor- 
poration from the stockholders and the directora did not accrue nutil judg- 
ment was obtained against the corporation upon the indebtedneas and the 
return upon the execution issued thereon nulla bona. Until that time 
they could not have taken proceedings to compel the return of the assets 
, distributed among the stockholders, and the application thereof to the 
pUintiff'a judgment. Hnghes v. Whitaker, 84 N. C. 640, in which It was 
said that the plaintiff's remedy 'is open, and is not obstructed by the lapse 
of time, since until he recovers judgment bis claim as a creditor is not 
eatabljahed. ' In that csae the judgment creditor was aeeking to puraue 
the funds of the estate which had been fraudulently alienated. ' No cause 
of action accrues against the shareholder until the creditor has failed to 
make the amount of hia judgment or ascertained claim from the aasets 
of the company, or unlesa, perhaps, in certain eases it appears to be useless 
to proceed against the corporation.' Hawkins, v. Qlenn, 131 U. S. 319; Bco- 
ville V. Thayer, 105 U. S. 143. 

"In the case of Taylor v. Bowker, 110 U. S. 113, it was held that in a 
proceeding 'to enforce judgment against the property of a corporation 
whose charter had been aurrendeied, the cause of action does not accrue 
until the execution has been returned against the corporation.' " Chatham 
V. Bealty Co., ISO N. C. 600, 105 8. E. 329. 

49, By-laws. A corporation may, by its by-laws, -when consist- 
ent with its charter, determine the manner of calling and con'- 
ducting all meetings; the number of members that constitute a 
quorum, but in no case shall more than a majority of shares or 
amoimt of interest be required to be represented at any meeting 
in order to constitute a quonun, and if the quorum is not so deter- 
mined by the corporation, a majority in interest of the stockhold- 
ers, represented either in person or by proxy, constitutes a quo- 
rum; the number of shares that will entitle the members to one 
or more votes ; the mode of voting by proxy ; the mode of selling 
shares for the nonpayment of assessments ; the tenure of ofSce of 
the several officers, and the manner in which vacancies in any of 
the offices shall be filled till a regular election; and they may 
annex suitable penalties to such by-laws, not exceeding in any 
case the sum of twenty dollars for any one offense. The power 
to make and alter by-laws is in the stockholders, but a corporation 
may, in the certificate of incorporation, confer that power upon 
the directors. By-laws made by the directors under power so con- 
ferred may be altered or repealed by the stockholders. 

C. 8., s. 1127; Rev., bs. 1145, 1146; Code, a. 664; 1901, c. 2, bb. 12, 13. 

Oorporatlotis g S7. As between a corporation and its atocklioldeTs and the. 
stockholders themaelvcB, a by-law or resolution may be considered as a 
contract.— Misenheimer v. Alexander, 102 N. C. 226, 78 S. B. 161. 



DidilzedbyCoO^IC 



44 North Carolina Corporation Code 

A corporation may mahe by-lnvrs to govern the sale of stock for iion- 
paymeiit of subacriptions. — Elizabeth City Cotton Mills v. Dunatan, 121 
.S. C. 12, S. E. 1001. 

60. Implied powers. In addition to the powers enumerated in 
the two preceding sections, and the powers specified in its char- 
ter, every corporation, its oflScers, directors and stockholders, pos- 
sess all the powers and privileges contained in this chapter so far . 

tis ihoy are Dctcssai'y (ir comeiiient to the attaiiiiiieut ot the ob- 
jects set forth in such charter, and shall be governed by the pro- 
visions and be subject to the restrictions and liabilities in this 
chapter contained, so far as they are applicable to and not incon- 
sistent with such charter; and no corporation may possess or ex- 
ercise any other corporate powers, except such incidental powers 
as are necessary to the exercise of the powers so given. Nothing in 
this chapter shall authorize or empower corporations organized 
under this chapter to lease, operate, maintain, manage or control 
any railroad except street railways. 

C. 8., B. 1128; Rev., a. 112&; Code, a. 701; 1897, c. 204; 1901, c. 2, s. 4; 
1901, c. 6. 

Ootporations § 370. A mannfacturing corporatioti engaged in the opera- 
tion of a cotton mill haa no implied power to insure the life of ita president, 
at least beyond tlie period of hia connection with the company. — Victor v. 
Louise Cotton Mills, 148 N. G. 107, 61 S. E. 648. 

Corporations g 374. A corporation posaesaes only thoae implied powers 
which are necessary to enable it to carry out the powera expressly grante'd, 
and ita expresa powers cannot be enlarged by implication. — Ibid. 

OorpocatloDS §389. The corporate charter is the only source to which 
a court can look to ascertain what power is conferred on a corporation. — 
Ibid. 

Corporations other than railroad companies have a general power to 
mortgage their Jjroperty, unless prohibited by some provision in the char- 
ter, the right to mortgngp being a natural result of the right to incur an 
Indebtedness.— AntieUm Paper Co. v. Chronicle Publishiug Co., 115 N. C. 
H2, 20 8. E. 366. 

Oorpoiatfous g^lS. The directors of a corporation, unless speeiallj^ re- 
atrained by the charter or by-laws, may borrow mouey with which to con- 
duct its business, and secure pa3'n)eiit by mortgage on corporate property. — 
Wall v. Rothroek, 171 N. C. 388, 88 8. E. 633. 

Ultra vires contracts. 

Banks § 101. A bank cannot avail itself of the defense of ultra vires 
upon being sued by a purchaser for value on an acceptance discoitnted 
and transferred by the bank; there being nothing against public policy ia 
the transaction, and the defendant not having offered to refund,— Sberrill 
T. American Trust Co., 176 N. C. 591, 97 8. E. 471. 

Corporations § 426. The law will not allow a corporation to repudiate 
the acts of ita president in executing a corporate note, and at the same 
time retain the property for which the note was given. — Phillipa v. Inter- 
state Land Co., 178 N. C. 514, 97 S. E. 417. 

DiyilzcdbvCoO^IC 



NffliTH CjutOLiMA Corporation Ck>DE 45 

Ooipontloiu 1 387. If an act of a cotporatioo be ultra vires, an}' ons or 
more stockholders may c&U it io question, aud hav« relief, unless barred 
by having consented to or acquiesced in it. — Victor v, Louise Cotton Milts, 
U8 N. C. 107, 61 8. E. 848. 

Oarpoiatlons % 426. After receiving beneflta of contract, a corporation is 
estopped from pleading the making of the contract was ultra vires. — Board 
of Trustees v. Piedmont Bealtj Co., 134 N. C. 41, 46 B. E. 723. 

Gotvorattons g 390. Whether corporate acts a 
of law to be drawn from facts stated .~~Spe nee 
Co., 137 W. C. 107, 4B S. E. 96. 

61. Banking powers not conferred by tills act. No corporation 
created under the provisions of this chapter shall have the power 
to carry on the buainess of discounting bills, notes or other evi- 
dences of debt, of receiving deposits of money, of buying gold or 
silver buUlon or foreign coins, of buying and selling bills of ex- 
change, or of issuing bills, notes or other evidences of debt, upon 
loan, or for circulation as money; but in the transaction of its 
business it may make and take and indorse, when necessary, all 
such bonds, notes and bills of exchange as the business may 
require. 

C. B., t. 1129; Rev,, s. 1134; Code, s. 684; 1901, c. 2, s. 5. 

62. Amendments before payment of stock. The incorporators 
of a corporation, before the payment of any part of its capital, 
may file with the secretary of state an amended certificate of in- 
corporation, duly signed and* acknowledged by the incorporators 
named in the original certificate, changing the original certificate 
of incorporation, in whole or in part, which amended certificate 
takes the place of the original one, and when recorded in the 
proper county is deemed to have been filed and recorded on the 
date of filing and recording the original certificate. The officers 
are entitled to the same fees for filing and recording the amended 
certificate of incorporation as if it were original; but there shall 
be charged no additional organization tax, except when the cer- 
tificate is amended by increasing the capital stock, in which event 
such tax shall be paid upon the increase. 

C. S., B. 1130; Rev., a. 1174; 1901, c. 2, s. 28. 

Corporations g S4. Anv fundamental change in the rhnrtcr of a coriKtra- 
tion relieves a non-assentin); subecriber from liability on his stock. — Bank 
V. City of Charlotte, 85 N. C. 433. 

63. Amendments, generally. A corporation, whether organized 
under a special act or general laws, and which might now be 
created under the provisions of this chapter, may, in the manner 
set out below — 

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46 North Carolina Corporation Code 

1. Change the nature or relinquish one or more branches of its 
business, or extend its business to such other branches as might 
have been inserted in its original certificate of incorporation, 

2. Change its name. 

3. Extend its corporate existence, but if such corporation pos- 
sesses powers, franchises, privileges or immunities, which could 
not be obtained under this chapter, such extension does not con- 
tinue, renew or extend any of the same, but they are waived and 
abandoned by the filing of the certificate of extension. 

4. Increase or decrease its capital stock. 

5. Change the par value of the shares of its capital stock. 

6. Oeate one or more classes of preferred stock. 

7. Make any other desired amendment. In all eases the certi^- 
cate of amendment can contain only such provisions as could be 
lawfully and properly inserted in an original certificate of in- 
corporation filed at the time of making the amendment. 

The board of directors shall pass a resolution declaring that 
the amendment is advisable, and call a meeting of the stockholders 
to take action thereon ; the meeting shall be held upon such notice 
as the by-laws provide, and in the absence of such provision, upon 
ten days notice, given personally or by mail ; if two-thirds in in- 
terest of each class of the stockholders with voting powers vote in 
favor of the amendment, a certificate thereof shall be signed by 
the president and secretary, under the corporate seal, acknowl- 
edged as in the case of deeds to real estate, and this certificate, to- 
gether with the written assent, in person or by proxy, of said 
stockholders, shall be filed and recorded in the office of the secre- 
tary of state. Upon such filing the secretary of state shall issue a 
certified copy thereof, which shall be recorded in the office of the 
clerk of the superior court of the county in which the original 
certificate of incorporation is recorded, and thereupon the certif- 
icate of incorporation is amended accordingly. The certificate 
of the secretary of state, under his oflicial seal, that such certifi- 
cate of amendment and assent have been filed in his office, is evi- 
dence of the amendment in all courts and places. A corporation 
which cannot now be created under the provisions of this chapter 
may in like manner increase or decrease its capital stock, or 
change its name. 

. 380; 1899, e. 818; 1901, c. 2, 



sdbyCoO^IC 



North Carolina Corporation Code 47 

S4. Amendmenta hj charitable, eduoational, penal or reforma- 
tory corporations. A charitable, educational, penal or reforma- 
tory corporation not under the patronage or control of the state, 
whether organized under a special act or general laws, may 
change its name, extend its corporate existence, change the man- 
ner in which its directors, trustees, or managers are elected or ap- 
pointed, abolish its present method of electing such officers and 
create a different method of election, and generally reorganize the 
manner of conducting such- corporation, and make any other 
amendment of its charter desired, in the following manner: The 
board of directors, trustees, or managers shall pass a resolution 
declaring that the amendment is advisable, and call a meeting 
of trustees, managers, and directors to take action thereon. The 
meeting shall be held upon such notice as the by-laws provide, 
and in the absence of such provision, upon ten days notice given 
personally or by mail. If two-thirds of the directors, trustees, or 
managers of the corporation vote in favor of the amendment, a 
certificate thereof shall be signed by the president and secretary 
under the corporate seal, acknowledged as provided in the case 
of deeds to real estate, and such certificate, together with the writ- 
ten assent in person or proxy of two-thirds of the directors, trus- 
tees, or managers, shall be filed and recorded in the office of the 
secretary of state, and upon filing it he shall issue a certified copy 
thereof, which shall be recorded in the office of the clerk of the 
superior court of the county in which the original certificate of 
incorporation is recorded, or in which the corporation is doing 
business, and thereupon the certificate of incorporation shall be 
deemed amended accordingly. Such certificate of amendment may 
contain only siich provision as it would be lawful and proper to 
insert in an original certificate of incorporation made at the time 
of making the amendment, and the certificate of the secretary of 
state, under his official seal, that such certificate and assent have 
been filed in his office shall be taken and accepted as evidence of 
such amendment in all courts. 

a S., s. H32; 1917, c. 62, b. 1. 

66. Change of location of principal office. The board of direc- 
tors' of a corporation organized under the laws of this state may, 
by resolution adopted at a regular or special meeting by a two- 
thirds vote of its members, change the location of the principal 
office of the corporation in the state. A copy of the r^olution, 

DiyilzcdbvCjOO^IC 



48 North Carolina Corporation Code 

signed by the president and secretary of the corporation and 
sealed with the corporate seal, shall be filed in the office of tiie 
secretary of state. No certificate need be filed of the removal o£ 
an office from one point to another in the same town, city, or town- 
ship. 

C. S., a. 1133; Rev., 8. 1176; 1901, c. 2, ». SI. 

Venoa §603. Tha phrase ''the principal place of boBinaBs" is aynonj- 
mous with the words "uriiicipnl office." — Roberson v. Greenleaf- Johnson 
Lamber Co., 153 N. C. 120, 6S S. £. 1064. 

B6. OnratiTe act; amendments prior to 1901. All amendments 
to the plan of incorporation of any corporation organized under 
the provisions of the general laws of North Carolina prior to the 
passage of the act entitled "An act to revise the corporation law 
of North Carolina," being chapter two, public laws of nineteen 
hundred and one, are declared to be valid in all respects, whether 
such amendments were made in accordance with the provisions 
of chapter three hundred and eighty of the public laws of eigh- 
teen hundred and ninety-three or in accordance with the provi- 
sions of chapter two of the public laws of nineteen hundred and 
one; but no amendment shall be validated by this section unless 
it is an amendment of such nature as is authorized to be made 
under the provisions of chapter two of the public laws of nine- 
teen hundred and one. 
C. 8., B. 1134; Rev., a. 1248; 1905, e. 316. 

67. Amendment or repeal of this chapter ; a part of all charters. 
This chapter may be amended or repealed by the legislature, and 
every corporation is bound thereby; but such amendment or re- 
peal shall not take away or impair any remedy against the cor- 
poration, or its officers, for any liability which has been previously 
incurred. This chapter and all amendments are a part of the 
charter of every corporation formed hereunder, so far as the same 
are applicable and appropriate to the objects of the corporation. 

C. 8., B. 1135; Rev., s. 1136; 1901, c. 3, s. 7. 

68. Name most b« displayed. The name of every corporation 
must be at all times conspicuously displayed at the entrance of 
its principal office in this state, and in default thereof for sixty 
days the corporation is liable to a penalty of one hundred dollars, 
to be recovered with costs, by the state, in an action to be prose- 
cuted by or under the direction of the attorney-genera!. 

C. S., s. 1136; Rev., a. 1243; 1901, c. 2, a. 50. 

69. Besident process agent. Every corporation having prop- 

D,„l,z.dbyG00g[c 



North Carolina Corporation Code 49 

erty or doing buBinesB in this state, whether incorporated under 
its laws or not, shall have an officer or agent in the state upon 
whom process in all actions or proceedings against it can be 
served. A corporation failing to comply with the provisions of 
this section is liable to a forfeiture of its charter, or to the revo- 
cation of its license to do business in this stale. In the latter 
event, process in an action or proceeding against the corporation 
may be served upon the secretary of state by leaving a true copy 
thereof with him, and he shall mail the copy to the president, sec- 
retary or other officer of the corporation upon whom, if residing 
in this state, service could be made. For this service to be per- 
formed by the secretary, he shall receive a fee of fifty cents, to be 
paid by the party at whose instance the service was made. 

C. 8., B. H37; Bbv., b. 1243; 1901. c. 5. 

OOTporfttloiu §668. Where a stnte liaa establiflhed by etatute a method 
of personal Bervice on forciRn corporations doing buginess therein, rea^ 
Bonably calculated to give full notice, a corporation doing bliBireaB in the 
itate will be taken to have accepted as valid the method provided. — Oliver 
V. I'nitcd Stntea Fidelity & Guaranty Co,, 174 N. C. 417, 93 R. E. 948. 

Oorpor&tioafl iMl, The provision for personal Berviee on corporations 
doinfc buBinesB in the Btate by leaving a copy of the aummons with the 
secretary of Btate, held valid. — Cnrrie v. Goleonda Min. £ Mill. Co., 157 
X. C. 209, 72 S. E. 980. 

Idmitationa of Actlona g88. Where a foreign corporation has complied 
with the statute by continuously maintaining an agent in the state upon 
whom valid service may be had, it ib protected by the statute of limitations, 
although there waa no formal eomplinnce with atatutory rcqulTcmenta for 
domestication and process agents. — Oliver v. United States Fidelity i 
Gunrnnty Co,, 174 N. C. 417, 93 S. E. 948. 

UmitatlonB of Acttona § 88. The appointment of a local agent on whom 
process can be served by a foreign corporation puts into forte the statute 
of limitation, which is auapended by Revisal 1905, section 366, as to 
nonreBidont defendant?. — VoUvar v. Richmond Cedar Works, 152 N. C. 
656, 68 S. E. 200. 

60. Ooiporate coDveyances ; when void as to ttn^. Any corpo- 
ration may convey lands, and other property which is transfer- 
able by deed, by deed sealed with the common seal and signed 
in its name by the president, a vice-president, presiding member or 
trustee, and two other members of the corporation, and attested 
by a witness, or by deed sealed with the common seal and signed 
in its name by the president, a vice-president, presiding member 
or trustee, and attested by the secretary or assistant secretary of 
the company. But any conveyance of its property, whether ab- 
solutely or upon condition, executed by a corporation, is void as to 
torts committed by such corporation prior to the execution of 
.said deed, if persons injured, or their representatives, commence 

DiyiizcdbvCjOO^Ie 



50 North Cabolina Corporation Code 

proceedings or actions to enforce their claims against said corpo- 
ration within sixty days after the registration of said deed as re- 
quired by law. 

C. S., B. 113S; Bev., 1130; Code, a. 6B5; 1S91, c. US; 1893, c. 95, a. 2; 1899; 
e. 235, B. 17; 1901, c. 2, b. 2; 1903; e. 660, a. 1; 190S, c. 114. 



Oorpoiatlom §309. While the execution by a corporation of a mortgage 
deed in the manner prescribed by above Bection, when the corporate aeal is 
affixed, is presumed to be authorized hy the stockholders, this preauinptioii 
is rebutted when the deed is eiecuted to the corporation's ofTiceTS.— Ed- 
wards V. Snow Hill Supply Co., 150 N. C. 171, 63 S. E. 742. 

Ooipoiatlons g4T7. That the common seal was affixed to a real estate 
mortgage executed by a corporation was prima facie evidence that it was 
so affixed, and that the mortgage was executed by proper authority. — Ibid. 

QorporatlonB gll4. Both at common law and under above section, re- 
quiring corporate deeds to be attested by the secretary with the corpo- 
rate seal, a deed executed in the corporate name by the president and other 
members, without such seal, is insufficient, although the word "seal" oc- 
curs after the signatures. — Caldwell v. Morganton Manufacturing Co., 121 
N. C. 339, 28 8. E. 475. 

Wlien void as to torts. 

Corporations 6 480. Where the holder of a judgment against a corpora- 
tion for tort failed to commence an action to enforce bis cSiim within sixty 
days after the registration of a deed of trust subsequently given by the 
judgment debtor, he canuot claim a preference. — Joyner v. Keflector Co., 
176 N. C. 274, 97 8. E. 44. 

eorporatloiu g480. An action brought by creditors of a bank within 
aiity days of the filing of an assignment for the benefit of creditors, to 
recover their debts, avoids such an assignment. — Fisher v. Western Carolina 
Bank, 132 N. C. 769, 44 S. E. eOl, Williams v. West AaheviUe & 8. S. Hy. 
Co., 126 N. C. 918, 36 S, E. 189. 

61. Conditional sale contracts. Contracts, in writing, for the 
purchase of personal property by corporations, providing for a 
lien on the property or the retention of the title thereto by the 

' vendor as a security for the purchase price, or any part thereof, 
are sufficiently executed if signed in the name of the corporation 
by the president, secretary or treasurer in his official capacity, 
and may be acknowledged and ordered to registration as is pro- 
vided by law for the execution, acknowledgment and registra- 
tion of deeds by natural persons. ' 
C. 8., B. 1139; 1909, c. 335, s. 1. 

62. Mortgaged property anbject to execution for labor, clerical 
services, and torts. Mortgages of corporations upon their prop- 
erty or earnings cannot exempt said property or earnings from 
execution for the satisfaction of any judgment obtained in courts 
of the state against such corporations for labor and clerical serv- 

DidilzedbyCoO^IC 



North Caeoijna Coepobation Code 51 

ices performed, or torts committed whereby any person U killed 
or any person or property njured. 

C, 8,, a. 1140; Rev., 8. 1131; Coda, s, 1255; 1897, c. 334; 1901, e. 2, ■. 3; 
1915, c. 201, «. 1. 

ClaimB for "material fumiihed" formerly allowed were abolished by 
amendment to Code, g 1255, in 1697. 

MkBter ft 8«rTant § 82. A luperinteadent of & mill, whose duties con- 
sist of overseeing the milling operations, keeping books, etc., bnt who 
does oof perform any manual labor, does not perform "labor" within tbo 
meaning of the statute. — Moore v. American Industrial Co., 13S N. C. 304, 
SO 8. E. 6ST. (ThiH case was decided prior to tlie insertion by the laws 
of 191S, c. SOI, the words "and clerical services performed."} 

Oorpomtlons g4SS. 8e^tion confers no Uen upon the proceeds of a sale 
of a factory's cloth and yarn for coat furnished to and used by it in their 
manufacture.— Norfleet v. Tarboro Cotton Factory, 172 N. C. 833, 89 8, E. 
785. 

Oorpomtlons g480. Section confers no lien oi priority upon the bolder 
of a tort judgment against a corporate deed of trust subsequently given. — 
Joynar v. Beflector Co., 176 N. C. 274, 97 S. E. 44. 

Corporations % 566. The preference given for labor performed over prior 
mortgages of corporations applies only to the laborers employed by the 
corporation in carrying on its ordinary businesSj including repairs and up- 
keep, and does not confer such preference upon contractors wbo employ 
labor under a contract to place betterments upon the company's property. — 
Coi V. New Bern Lighting & Fuel Co., 152 N. C. 165, 67 8. E. 477. 

InsolTenC7 g 119. A mortgagee is entitled to assert priority of bis 
mortgage given by a third party on lumber sold to insolvent company 
with bis consent, even as against tabor liens against that company. — Wal- 
ker V. Linden Lumber Co., 170 N. C. 400, 87 B. E. 331. 

InsolTency g 119. Section held not to give preference for work done 
by laborers of an insolvent corporation under a contract assigned to it by 
one who had given security for the performance thereof. — Roberts v. 
Bowen Manufacturing Co., 169 N. C. 27, 85 8. E. 45. 

Corporations g 480. One who takes a mortgage upon corporation property 
for money loaned does so with the knowledge that his lien may be displaced 
in favor of laborer's liens or judgments for tort and the expenses of ^- 
eeivership or of other .court proceedings to wind up the corporation in 
cases of insolvency. — Humphrey Bros. v. Buell-Crocker Lumber Co., 174 
N. C. 514, 93 8. E. 971. 

eoiportttlona g480. When a corporation baa acquired the property io- 
Tolved subject to a valid recorded pure base -money mortgage, the prop- 
erty is an asset of the corporation only to the extent of its eqnity of re- 
demption and the lien of the mortgagee is superior to all other claims. — 
Ibid. 

K«celTeTS §178; Where the road of an insolvent railroad company is 
sold at a foreclosure sale, and an action for injuries received while it was 
operated by sneh company is bronght against the pnrehaser, and the re- 
ceiver of the former company is made a party, the insolvent company is 
not a necessary party thereto. — Howe v. Harper, 127 N. C, 356, 37 S. E. 505. 

Corporations g 482, A purchaser at a foreclosure sale takes subject to 
a jodgment against the corporation for a tort committed after the making 
of tbe m.ortgage, notwithstanding the judgment was obtained subsequent 
to the sale.— Wilmington ft W. K. Co. v. Burnett, 123 N. C. 210, 31 8. E. 602. 



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52 North Carolina Corporation Code 

Oorporatlons g4S2. A purrhaner of lands at a forecloanre galej with 
notice of a claim tbat existed against the corporation mortgagor at the 
time the mortgage was executed, acquires nr> rights as' against the creditor. 
— Langston v. Greenville Land & Improvement Co., 120 N. C. 132, 26 8. E. 
644. 

Where, pending n suit to foreclose a railroad mortgage in the federal 
court, a passenger recovered a Judgment in a state court against the rail- 
road company for alleged personal iniury, resulting 'from assault and bat- 
tery committed on him by the railroad company's conductor, the judgment 
I'nnstituteB a prior lien on the railroad rtsmpatiy's property to that of ttfe 
mortgage foreclosed. — Trust Company v. N; 8. B. Co., 1S3 Federal 803. 

63. Gas and electric power companies. Gas and electric light 
and power companies have power to lay, extend, construct,' erect, 
maintain, repair and remove all necessary or convenient towers, 
poles, cable wires, conductors, lamps, fixtures, appliances, and ap- 
purtenances upon, through and over any roads, streets, avenues, 
lanes, alleys and bridges within and near any city, town or vil- 
lage where said company is located ; and all such roads, streets, 
lanes, alleys and bridges shall be left in as good condition as they 
were in at the time of using them as aforesaid: Provided, that the 
rights and privileges conferred in this section shall not be exer- 
cised unless the authorities of such city, town or village first give 
their consent, and afterwards the said authoritios shall have full 
power to control the location of all towers, poles, wires, conductors 
and all other fixtures, appliances and appurtenances belonging to 
or operated by any of said companies. 

C. 8., B. 1141; Rev., g. 1133; 1889 (Pr.), c. 35, s. 2. 

Eminent Domain g 119. The use of a street for laying pipes, etc., in 

furnishing water, lights, etc., does not impose any additional servitude 
beyond those reasonably included in the dedication of all streets. — Smith 
T. City of Goidsboro, 121 N. C. 350, 28 S. E. 479. 

64. No title by posaeasion of rig'ht of way. No railroad, plank 
road, turnpike or canal company may be barred of, or presumed 
to have conveyed, any real estate, right of way, easement, lease- 
hold, or other interest in the soil which has been condemned, or 
otherwise obtained for its use, as a right of way, depot, station- 
bouse or place of landing, by any statute of limitation or by occu- 
pation of the same by any person whatever, 

C. S., B. 434; Kev., s. 388; Code, s. 150; C. C. P., s. 28; R. C, e. 65, 8. 23. 

Railroads g S2. No railroad company shall be barred of or presume to 
have conveyed any right of way which may have been condemned or 
otherwise obtained by any statute of limitation, or by any occupation oC 
the same by any person, the possession by individuals of land covered by 
a railroad right of way cannot operate as a bar to or be the basis for any 
presumption of abandonment by the railroad of its right of way. — Sea- 
board Air Line Ry. Co. v. Olive, 142 N. C. 257, S3 S. E. 263. 



DiyilzcdbvCoO^IC 



North Carolina Corporation Code 53 

Bailrosds |82. The right of way ie dedicated to public nee. It ie fpr 
Uiis reason protected against lost by adverse pOBaeasion or penniBnive poa- 
Beasion of ita right of way. — Muae v. Seaboard Air Line Bv. Co., 149 N. C. 
443, 63 S. E. 102. 

B&Uroads §82. The provision that no railrond shall be barri'd bv limi- 
tations as to its riffht of nay by occupation of another, held to have no 
application where a city ie merely coatonding for the right to require the 
railroad to conform its grade to that of croseing streets. — Atlantic Coast 
Line R. Co. v. City of Goldsboro, 155 N. C. 366, 71 S. E. 514. The railroad 
company appealed to the Supreme Court of the United States and the 
decision was affirmed. Below is a digest of the Supreme Court's opinion: 

Neither the contract nor due process of law clause of the federal con- 
stitution prevents a municipality from forbidding a railroad company, 
through whose acquieaceuce a part of its right of way through a city has 
become the city's principal business street to shift cars on the tracks 
lying in the heart of the city ercept during specified hours, or permit 
cars to stand there for more than five minutes and by requiring the tracks 
to conform to the street grade and the spaces between the rails to be 
filled in except at street intersections- — Atlantic Coast Line B. Co. v. City 
of Goldsboro, 232 V. S. 548, 58 Law. Ed. 721, 34 S. Ct. 364. 

Ballioads §82, Adverm PossessfoQ gS6. A railroad company was not 
barred, and no presumption of abandonment or release of its right of way 
arose, by reason of the occupation or use thereof by the owner of the 
land.— Norfolk Southern B. Co. v. Stricklin, 2G4 Federal 546. 

65. No title by posaession of public miys. No persoii or corpo- 
ration shall ever acquire any exclusive right to any part of a pub- 
lic road, street, lane, alley, square or public way of any kind by 
reason of any occupancy thereof or by encroachment upon or ob- 
structing the same in any way, and in all actions, whether civil or 
criminal, against any person or corporation on account of an 
encroachment upon or obstruction or occupancy of any public vvay 
it shall not be competent for a court to hold that such action is 
barred by any statute of limitations. 

C. 8., a. 435; Rev., s. 38»; 1891, c. 224. 

Adversa Fossession § 4. Title to land could be acquired by adverse pos- 
■ession as against a municipal corporation prior to the enactment of this 
■tatute.— Town of Lumberton v. Branch et L'lt., 180 N, C. 249, 104 S. "C. 460. 

Limitation of Actions g6. One not entitled to acquire title by posses- 
■ion to a part of a public square of a county. — Gates County v. Hill, 158 N. 
C. 584. 7? 9. E. 804. 

7 S. E. 521; Tillery v. White- 

68. Use of public highways. Any duly incorporated company 
possessing the power to construct telegraph or telephone lines, 
lines for the conveying of electric power or for light, either or 
all, has the right to construct, maintain and operate such lines 
along any railroad or other public highway, but such lines shall 



54 North Carolina Corporation Code 

be 80 constructed and maintained as not to obstruct or hinder th« 
usual travel on such railroad or other highway. 

C. S., B. 169S; Bev., s. 1571; Code, s. 2007; 1S99, c. U, a. 1; 1903, e. S62; 
1871-6, c. 203, ■. 2. 

Eml&Hit Domkln g 120. Where, hj the conatructioii of its telegragb line 
on B railroad right ot way, defeudaiit impoaed an additional bardeu on the 
fee, and the owner of the fee, which wa« aubject to the easement of the 
railroad, is entitled to compensation tor the additional bardan. — Query v. 
Postal Telegraph-Cable Co., 178 N. C. 639, 101 S. E. 390. To the same effect. 
— Teeter v. Postal Telegraph Company, 17E N. C. 783, 90 8. E. 941. 

EDUnent Domain g 45. A corporation maintaining a line on Ite right of 
way to convey electric power may acquire the right to cut trees on con- 
tiguous property dangerous to the line.— Yadkin Biver Power Company 
T. Wiwler, 160 N. C. 269, 76 8. E. 267. 

EmllLBItt Domain g 60. An electric light or street railway company can- 
not, by eminent domain, acquire the right to cut down trees in the edge of 
the sidewalk for mere convenience in erecting poles and wires; it not being 
neeeaeary therefor. — Brown v. Asheville Electric Light Company, 133 N. C. 
633, 51 8. E. 62. 

67. Electric and hjdro-eleobic power compajiies may appropri- 
ate hjj^ways; oonditions. Every electric power or hydro-electric 
power corporation which may exercise the right of eminent do- 
main under the chapter Eminent Domain, where in the develop- 
ment of electric or hydro-electric power it shall become necessary 
to use or occupy any public highway, or any part of the same, 
after obtaining the consent of tbe board of county commissioners 
of the county in which such public highway is situate, shall have 
power to appropriate said public highway for the development of 
electric or hydro-electric power.- Provided, that said electric 
power or hydro-electric power corporation shall construct an 
equally good public highway, by a route to be selected by and 
subject to the approval and satisfaction of the board of county 
commissioners of the county in which said public highway is sit- 
uated : Provided further, that said company shall pay all damages 
to be assessed as provided by law, by tbe damming of water, the 
discontinuance of the road, aud for the laying out of said new 
road. 

C. 8., s. 1696; 1911, c. 114. 

68. Acqitisition of right of vr&j 1^ contract. Such telegraph, 
telephone, or electric power or lighting company has power to 
contract with any person or corporation, the owner of any lands or 
of any franchise or easement therein, over which its lines are 
proposed to be erected, for the right of way for planting, repair- 
ing and preservation of its poles or other property, and for the 
erection and occupation of offices at suitable distances for the pub- 

DidilzedbyCoO^IC 



North Cabouna Corporation Code 55 

lie accommodation. This section shall not be construed as re- 
quiring electric power or lighting companies to ereet offices for 
public accommodation. 

C. 8., 8. 1687; Kev., a. 1572; Code, 9. 2008; 1898, c. 64, 1903, 0. 56S, bs. 1, 
2; 1874-3, e. 203, 1. 3. 

Xirainent Domain § 149. Where a telegraph company constructed its line 
over I&ndi in which plaintiff owned the fee, subject to a railroad com- 
pttnjr'a easemeDt for a right of way, plaintiff is entitled to a reaaonable 
compeaBatioD for the additional burden. — Query v. Postal Telegraph-Cable 
Company, 178 N. C. 639, 101 S. E. 3B0; Teeter v, Poatal Telegraph Com- 
pany, 172 N. C. 783, 90 8. E. 941. To the same effert: Hodges v. Western 
Union Telegraph Company, 133 N. C. 325, 45 8. E. 572; Narron v. Wilming- 
ton £ Weldon B. B. Co., 122 N. C. S56, 29 8.. E. 356. 

69. Deeds of easementB. All persons, firms, or corporations now 
owning or hereafter acquiring any deed or agreement for rights 
o£ way and easements of any character whatsoever shall record 
such deeds and agreements in the office of the register of deeds of 
the county where the land affected is situated. Where such deeds 
and agreements may have been acquired, but no use has been 
made thereof, the person, firm, or corporation holding such in- 
strument, or any assignment thereof, shall not be required to re- 
cord them until within ninety days after the beginning of the use 
of the easements granted thereby. If after ninety days from the 
beginning of the easement granted by such deeds and agreements 
the person, firm, or corporation holding such deeds or agree- 
ments has not recorded the same in the office of the register of 
deeds of the county where the land affected is situated, then the 
grantor in the said deed or agreement may, after ten days notice 
in writing served and returned by the sheriff or other officer of 
the county upon the said person, firm, or corporation holding such 
lease or agreement, file a copy of the said lease or agreement for 
registration in the office of the register of deeds of the county 
where the original should have been recorded, but such copy of 
the lease or agreement shall have attached thereto the written 
notice above referred to, showing the service and return of the 
sheriff or other officer. The registration of such copy shall have 
the same force and effect as the original would have had if re- 
corded : Provided, said copy shall be duly probated before being 
registered. 

Nothing in this section shall require the registration of the fol- 
lowing classes of instruments or conveyances, to wit : 

1. It shall not apply to any deed or instrument executed prior to 
January first, one thousand nine hundred and ten, 

DidilzedbyCoO^IC 



66 North Carolina Cobporation Code 

2. It shall not apply to any deed or inatrumeiit so defectively 
executed or witnessed that it cannot by law be admitted to pro- 
bate or registration, provided that such deed or instrument was 
executed prior to the ratification of this act. 

3. It shall not apply to decrees of a competent court awarding 
condemnation or confirming reports of commissioners, when such 
decrees are on record in such courts. 

4. It shall not apply to local telephone companies, operating 
exclusively within the state, or to agreements about, alley-ways. 

Any person, firm, or corporation knowingly and willfully vio- 
lating this section shall be guilty of a misdemeanor, and each 
day's continuance of this violation shall be a separate offense. 

This section shall not apply to Alleghany, Harnett, Lee, Surry 
and Wilkes counties. 
C. a, a. 3316; 1917, c. 148; 1919, c. 107. 

70. Plats and subdiTisions. Any person, firm, or corporation, 
owning land in this state, who may desire to subdivide the same 
into smaller tracts or lots for the purpose of sale or other pur- 
pose, may have a plat or subdivision of such land recorded in the 
office of the register of deeds of the county in which such land 
or any part thereof is situated, upon proof upon oath by the sur- 
veyor making such plat or subdivision that the same is in all 
respects correct and was prepared from an actual survey by him 
made, giving the date of such survey and the variation of the 
magnetic needle. Such plats or subdivisions when so proven, 
and probated as deeds and other conveyances, shall be recorded 
either by transcribing a correct copy thereof upon or by per- 
manently attaching the original to the records, or in a book to be 
designated the Book df Plats; and when so recorded shall be duly 
indexed. 

C. S., 8. 3S18; 1911, c. 55, a. 2. 

T«udor ft PnrchaBer g 130. Doapitc tha above section, merely regulat- 
ing prioritiea as betwoeD two canflicting dedications, where owner platted 
land, sliowing BtrcntB and alleys, nnd sold lots with reference to pl&t, but 
individual purchasers deeded relinquishment of rights in streets or alleys, 
while public never accepted, opened, or used such streets, and city authori- 
ties made formal renunciation, owner's title to all land is perfect, and he 
can compel acceptance by purchaser.^Wittson v. Dowling, 179 N. C. 543, 
103 S. E. 18. 

71. Deeds of trust and mortga^o, real and personal. No deed 
of trust or mortgage for real or personal estate shall be valid at 
law to pass any property as against creditors or purchasers for 

DiyilzcdbvCoO^IC 



North Carolina Corporation Code 57 

a valuable consideration from the donor, bargainor or mortgagor, 
but from the registration of such deed of trust or mortgage in 
the county where the land lies; or in case of personal estate, 
where the donor, bargainor or mortgagor resides; or in case the 
donor, bargainor or mortgagor, resides out of the state, then in 
the county where the said personal estate, or some part of the 
same, is situated ; or in case of choses in action, where the donee, 
bargainee or mortgagee resides. For the purposes mentioned in 
this section the principal place of business of a domestic corpora- 
tion is its residence. 

C. 8., s. 3311; Rev., s. 982; Code, s. 1254; R. C, c. 37, b. 22; 1S29, c. SO; 
1909, e. 874, a. 1. 



1 subsequent purchasers. Bley 

Sales §472. Conditional sales are regarded as chattel mortgages and 
void as to creditors and purchaseTs, except from registration.— -Observer 
Company v. Little, 175 N. C. 42, B4 S. E. 526. 

SalM 6472. Defendant trustee under an assignment (or benefit of cred- 
itors was a "purchaser for value," and his title under assignment recorded 
prior-to contract of conditional sale should be preferred to that of seller.— 
Coble V. Wharton, 177 N. C. 323, 98 S. E. 818. 

Chattel UortgageB g 87. A sawmiU and fixtures described In conveyance 
and trust deed as personal property, aud not shown to be annexed to the 
land, are "personal property" within the registration law. — Bank of Cole- 
rain V. Cox, 171 N. C. 76, 87 8. E. 967. 

Chattel Uortgages § 87. Registration in another county than in which 
mortgagor resides is unauthorized. — Foy & Sherawell v. Hurley, 172 N, C. 
575, 90 8. £. 582. 

BIortgagM § 176. An Instrument, sufficient as a mortgage to pass title, 
does not affect any land in a county in which the mortgage was not record- 
ed as against creditors of the mortgagor. — Williamson v. Bitting, 1S9 N. C. 
321, 74 S. E. 808. 

Blortgages g 90. Although scctioo provides that a mortgage shall be 
» lien only from its registration as between the parties to a mortgage or 
deed, the instrument is valid without registration; and it is also vnliil as 
against the personal representative of the mortgagor. — McBrayer v. Har- 
rill, 152 N. C. 712, 68 S. E. 204. 

Chattel HortgagM § 160. Where a chattel mortgage on a mule was 
properly registered in the county of the mortgagor's residence, it consti- 
tuted a valid lien on the mule wherever it could be foynd so as to entitle 
the mortgiigoe to maintain trover agitinst a purchaser from the mortgagor; 
such purchaser having disposed of the mule and appropriated the pro- 
ceeds.— Smoak & MeCreary v. Sockwell, 152 N. C. 503, 67 S. E. 994. 

Cliattel Mortgages g 139. A trust deed on crops to secure pre-existing 
debts constitute the holders purchasers for value within the registration 
laws and it requires prior registration of other deeds of trust or mortgages 
to affect their interests as such.— Odom v. Clark, Neville and 3andol[^, 
146 N. C. 544, 60 8. E. 513. nKiiiz^doXjOO^jIc 



58 North Carolina Corporation Code 

Buikmptcr, § 166. A chattel mortgage registered long after its execQ- 
tion, and within four months of the petition in bankruptcy, is a preference, 
if the mortgagees knew of the insolvency of the mortgagors. — Brigman v. 
Covington, 21S Federal 500. 

NOTE. Where a conveyance Ja made of practically entire estate of gran- 
tor by mortgage, or deed of trust, to secure pre-existing debts, Buch con- 
veyance will be construed to be an assignment and it must be done in the 
manner prescribed in Chapter 28, Consolidated Statutes, entitled Debtor 
and Creditor. — National Bank of Greensboro v. Gilmer, 116 N. C. 6S4, 2% 
8. E. 2. And where an assignment is made- and the provisions of C. 8., 
chapter 28, are not observed, the assignment is void. Odom v. Clark, 146 
N. C. 544, 60 8. E. 613. The courts will not construe a mortgage to be an 
assignment when the transaction, evidenced by the mortgage, was in good 
faith; where the conveyance was intended as a mortgage; where the prop- 
erty conveyed greatly exceeded the debt intended to be secured; and where 
a material part of the debt secured was based upon money or other things 
of value passing to the grantor at the time of the execution of the mortgage. 
— Wooten V. Taylor, 159 N. C. 604, 76 8. E. 11. 

72. Conditional sales of personal property. All conditional 
galea of personal property in which the title is retained by the 
bargainor shall be reduced to writing and registered in the same 
manner, for the same fees and with the same legal effect as is pro- 
vided for chattel mortgages, in the county where the purchaser 
resides, or, in case the purchaser shall reside out of the state, then 
in the co.unty where the personal estate or some part thereof is 
situated, or in ease of choses in action, where the donee, bar- 
gainee or mortgagee resides. 

C. 8., 8. 3312; Hev.. s. 983; Code, s. 1275; 1801, c. 240; 1883, c. 342. 

Bankruptcy §268. A seller in an unrecorded conditional sale contract 
cannot recover the property or the value, where the property was delivered 
to the buyer who was adjudged a bankrupt, and where the trustee in bank- 
ruptcy sold the property.— Hinton v, Williams, 170 N. 0. US, 86 8. E. 994. 

Sales 9^'^> ^ contract whereby the owner of goodr delivered them to 
another, the owner ntaiidiig title, and the one receiving the goods agree' 
ing to sell them and pay to the owner a Bpetified portion of the price for 
which they were sold, created a mere agency and was not a conditional 
sale.— Lance v. Bntler, 135 N. C. 419, 47 8. E. 488. 

See cases under preceding section. 

NOTE. If the property conveyed by the chattel mortgage or reserved 
in the conditional sale be machinery or any other property which, in use, will 
be fixed or nttnchcd to the land, it miglit be well lo ri'gislfr thi' mortgage 
or conditional sale contract in the county wherein the property is to ba 
sitnate as well as in the county wherein the mortgagor or purchaser under 
the conditional sale contract resides, if a natural person; and the county 
wherein the corporation has its principal office, if the mortgagor or pur- 
chaser under the conditional sale contract be a corporation. 

The cost of registration is trifling and the benefits real. 

73. Conditional sales or leases of railroad proportjr. When any 
railroad equipment and rolling stock is sold, leased or- loaned on 
the condition that the title to the same, notwithstanding the po8- 

DidilzedbyCoO^IC 



NoETH Carolina Corporation Code 59 

seBsion and use of the same by the vendee, lessee, or bailee, shall 
remain in the vendor, lessor or bailor until the terms of the con- 
tract, as to the payment of the installments, amounts or rentals 
payable, or the performance of other obligations thereunder, shall 
have been fully complied with, such contract shall be invalid as to 
any subsequent judgment creditor, or any subsequent purchaser 
for a valuable consideration without notice, unless — 

1. The same is evidenced by writing duly acknowledged before 
some person authorized to take acknowledgments of deeds. 

2. Snch writing is registered as mortgages are registered, in the 
office of the register of deeds in at least one county in which such 
vendee, lessee or bailee does business. 

3. Each locomotive or car so sold, leased or loaned has the name 
of the vendor, lessor, or bailor, or the assignee of such vendor, les- 
sor or bailor plainly marked upon both sides thereof, followed by 
the word owner, lessor, bailor or assignee, as the case may be. 

This section shall not apply to or invalidate any contract made ^ 
before the twelfth day of March, one thousand eight hundred and 
eighty-three. 

C. 8., 8- 3313; Bev., b. 984; Code. b. 2006; 1883, c. 416; 1B07, c. 150, a. 1. 
74 Synopsis of lim law. Below is a synopsis of the sections 
of the lien law of North Carolina affecting corporations. The 
complete lien law is contained in Chapter 49, Consolidated Stat- 
utes. 

NOTE. EveTj building conetrneted, repaired or improved, with tbe neo- 
easarj lot od which it be situate; and every lot, farm or vessel, and every 
kind of property, real or personal, shall be subject to a lien for the pay- 
ment of all debts contracted for work done on the same or material fnr 
nished. C. S. 2433. 

Any mechanic or artisan making or repairing any article of personal 
property at the request of the owner or of any person lawfully in pOBsessioii 
thereof is entitled to a lien on the article so made or repaired; may retain 
possession thereof; and after 30 days, if the debt be not over fifty dollars, 
and after BO days if tbe debt be over fifty dollars, may proceed to enforce 
the lien by selling the property after due advertisement. C. 8. 2435. 

Laborers performing work on logs, lumber, wood pulp, Hfid wood, tan- 
bark, etc., have a lien on the subject matter of their labor. C. 8. 2436. 

Snb- contractors and laborers who furnish labor or material for bnildingi 
altering or repairing a house, have a lien on the house and the lot on which 
it be situate (C. S, 2437), but must give notice of such claim to the owner 
or lessee of the building before he sfiall have settled with the contractor. 
0. B. 2438. 

Contractor before receiving any pay, to furnish to the owner or his agent, 
a list of indebtedness to laborers and material men. C. 8. 243B. r 

Laborer or material man performing work on or furnishing materlat^di-' 



60 North Carolina Cobpoeation Code 

building, veseel or railroad, may furnish to owner or his agents before the 
latter ihall have paid the contractor, an itemized statement of the 
amounts due for laboi and materials; and upon giving Ruch notice shall 
be entitled to all liens and benefits which would have accrued had the can- 
tractor given notice to the owner or his agents of such indebtedness. C S. 
2440, 2441. 

If money then due from owner to the contractor be not sufficient to dis- 
charge in full said liens, the same shall be paid pro rata. C. 8. 2442. 

Contractor, failing to famish said notice to owner and shall fail to pay 
laborers and material men, is guilty of a misdemeanor. C. S. 2443. 

Laborers employed by a contractor in building a railroad may give to 
railroad company notice of claim against contractor within twenty days 
after performance of labor (thirty days for material men after furnishing 
materials) and the railroad company shall be liable for the paj'ment of 
such labor or materials. Notii-e may be served on cugiiieers, supcriotoiident 
or agent of railroad company. Suit must be brought within ninety days 
after such notice. C. S. 2444. 

Contractor on municipal building or street ( 
give bond for the payment of all work done oj 
2445. 

Liens on vessels. — C. S. 2446. For labor loading and unloading vessels. — 
C. 8. 2447. Filing lien and laborers' notice to master. — C. 8. 3448 to 2458. 
Liens on articles warehoused. — C. 8. 2459, 2460. Liens on baggage in favor 
of hotels, boarding houses, etc. — C. 8. 2461 to 2463. Liens in favor of livery 
stable keepers.— C, 8. 2464 to 2466. 

WHERE AND WHEN TO FILE LTEN. Liens against personal property, 
not exceeding two hundred dollars, may be filed in the office of the nearest 
justice of the peace; if over two hundred dollars, or against any real 
property or interest therein, in the ofEce of the clerk of the court of the 
county where the labor was performed or the materials furnished. — C. S. 
2469. 

Liens must be filed within six months after labor done or materials fur- 
nished, except where the statute giving the lien prescribes a shorter period, 
in which case the shorter limitation governs. — C. S. 2470. Liens to have 
priority according to the date of filing notice with justice of the peace or 
clerk of superior court. — C. S. 2471. But lien for labor done on a crop shall 
relate to the commencement of the work. — C. 8. 2472. 

Suits to enforce liens (unless otherwise provided in the statute giving 
the lien) must be commenced within six months from date of filing notice, 
except where the debt does not fall due within six months, suits may be 
brought within 30 days after debt fnlls due. 

For agricultural liens for advancements, etc., see C. 8. 2480 to 2492. 

ART. 4. DIRECTORS AND OPPICERS. 

76. DirectoTft. The business of every corporation Bhall be man- 
aged by its directors, who must he at least three in number, and 
at all times bona fide stockholders in case the corporation is one 
issuing stock. A corporation may, by its certificate of ineorpora- 
tion or by-laws, determine the number of shares a stockholder 
must own to qualify him as a director. The directors shall be 



NOBTH Carolina Coeporation CtooE 61 

chosen annually by the stockholders at the time and place pro- 
vided in the by-laws, and shall hold office for one year and nntil 
others are chosen and qualified in their stead ; but by so provid- 
ing in its certificate of incorporation, a corporation may classify 
its directors in respect to the time for which they will sev^erally 
hold office, the several classes to be elected for different terms, but 
no class may be elected for a shorter period than one year, or for 
a longer period than five years, and the term of office of at least 
one class must expire in each year. A corporation which has more 
than one kind of stock may, by so providing in its certificate of 
incorporation, confer the right to choose the directors of any class 
upon the stockholders of such class, to the exclusion of the others. 
One director of every corporation of this state shall be, and only 
one need be, an actual resident of the state, notwithstanding the 
provisions of the charter or any other act. 
C. S., a. 1144; Bev., bb. 1147, 1148; 1901, e. S, as. 14, 44. 

Oorporatlom % 310. Irreapeetive o( tbeir actual knowledge of a corpo- 
ration 'a condition, directora tboreof are reapoaaible for damages sustained 
by stockholdera from their negligence, fraud, or deceit, and are not ex- 
cused, by their good faith alone, for lack of proper care, attention, and 
circumspection in conducting the corporate affairs, which is exacted of 
them SB truateea. Anthony v. Jeffreas, 1T2 N. C. 37a, 90 8. E. 414. 

Ooiporatlons g 310. Although directors of corporatioDB are not expected 
to attend to current business, the; must at their peril give such attention 
to and so manage the affairs of the company that they may be able at all 
times to know what their executive officers, agents, and fellow directora 
are doin|;, and they are liable to the corporation or its legal representativea, 
for losses occasioned by a breach of snch duty, — BesBelleu v. Brown, 177 
N. C. 65, &7 S. E. 743. 

OorpoiatlanB g SIO. Directors of a corporation are not liable for loss to 
the corporation, resulting from honest mistakea made in the exercise at 
their authority, or for miatakea of subordinate officera. — Braswell v. Pam- 
lico Ins. & Banking Co., 159 N. C. 628, 75 S. E. 813. 

Corporatlona §307. Directors of a corporation are trusteea of ita^ prop- 
erty for the benefit of the corporate creditors, as well as sbareholdeTs; it 
being their duty to administer the trust for the benefit of all parties noit- 
eerned.— Pender v. Speight, 159 N. C. 612, 75 S. E, 851. 

76. Officers, agents, and vacancies. Every corporation organ- 
ized under this chapter shall have a president, secretary, and 
treasurer, to be chosen either by the directors or stockholders, as 
. the by-laws direct, and they shall hold office until others are 
chosen and qualified in their stead ; the president shall be chosen 
from among the directors; the secretary shall record all the votes 
of the corporation and directors in a hook to be kept for that pur- 
pose, and perform such other duties as are assigned to him; 
the treasurer may be required to give bond for the faithful >^fc. 



62 North Carolina Ck)RPORATiON Code 

charge of hie duty in such sum, and with such Borety or sureties, 
as are required by the by-laws. Any two of these ofiBces may be 
held by the same person, if the body electing so determine. The 
corporation may have such other oiBcers and agents, who shall be 
chosen in the manner and hold office for the terms, and npon the 
conditions, prescribed by the by-laws or determined by the board 
of directors. Any vacancy occurring among the directors, or in 
the office of president, secretary or treasurer, shall be filled in 
the manner provided for in the fay-lawa ; in the absence of such 
provision the vacancy shall be filled by the bo,ard of directors. 
0. a, 1. 1146j Rev., BB. 1149, 1150, llSl; ISdl, e. S, w. 15, 16, 17. 

77. BookB to be audited on requMt of stockholden. TJpOD re- 
quest of twenty-five per cent of the stockholders, or of any stock- 
holder or stockholders owning twenty-five per cent of the capital 
stock, of a private corporation organized under the laws of North 
Carolina and doing business in this state, it is the duty of the offi- 
cers of the corporation to have all of its books audited by a com- 
petent accountant, so that its financial status may be ascertained. 
Upon refusal or failure of the corporation to commence the audit- 
ing of its books within thirty days after such request, the request- 
ing stockholder or stockholders, after ten days notice to the cor- 
poration, may apply to the judge of the district, or to the judge 
holding the courts of the district, in which the corporation has 
its residence, either at chambers or term time, at any place in the 
district, and the judge shall appoint an auditor and require the 
books to be audited at the expense of the corporation. The offi- 
cers of the corporation shall render to the auditor any assistance 
or information they can, and give him access to all of the assets, 
books, papers, etc., relating to the affairs of the corporation, in 
order that a proper audit may be made. Upon completion of the 
audit the auditor shall render a statement to the corporation, and 
to the petitioning stockholder or stockholders. 

0. S., B. 11«; 1911, c. 174, s. 1; 1813, c. 76, b. 1. 

78. LoaJis to stockholders. No loan of money may be made to 
a stockholder or officer of the corporation, and if any is made, the 
officers who made it or assented thereto are jointly and severally 
liable, to the extent of such loan and interest, for all the debts of ' 
the corporation until the repayment of the sum loaned. 

C. a., B. 1147; Bev., b. 1160; IflOl, c 2, a. 53. 

florporAttons g SO. Promoters of corporations occupy a fiduciary relation 

to it requiring the game good faitli which law exacts ot directors of cor- 
porations and other fiduciarieB, and can not make a secret proSt out of 



North Carolina Cospobation Code 



Section cited in Whitlock v. Alexander, 160 N. C. 465, 76 S. E. 538. 

79. Reports to corporatlOD cominissioi). In addition to the in- 
formation required to be given in the annual report o£ corpora* 
tions to the corporation commissioD nnder the provisions of the 
Revenue and Machinery Acts, spaces shall he provided in such 
manner as the corporation commission deem proper so that each 
corporation, whether stock or nonstock, shall report whether the 
stock, if any, issued by it was issued for cash or for purchase of 
property, designating what property, the names of all the direc- 
tors and officers, with the date of the election or appointment, 
terms of office, residence and postoffice address of each, the char- 
acter of its business, and the name of the agent in charge thereof 
upon whom process against the corporation may he served; but 
this shall not prevent service of process on other agents author- 
ized by taw. This information, together with the amount of 
stock issued and outstanding by the corporation, shall be available 
to the public upon application to the corporation commission. 
After these reports have been made to the corporation commission 
and the excess tax thereon has been computed and determined, it 
is the duty of the corporation commission to certify a list of such 
corporations, showing amount of stock issued by each, whether ow- 
ing an excess tax or not, to the state treasurer, who shall add to 
such excess tax, if any, the amotmt due by the corporation on ac- 
count of franchise tax, and forward' a statement of such indebt- 
edness to the corporation for payment, under the penalties pro- 
vided by law. Every corporation failing to comply with the pro- 
visions of this section shall forfeit to the state $100, to he collected 
by the sheriff of the county where the principal office of the cor- 
poration is situated, in a civil action to be brought before a justice 
of the peace, and when collected shall be remitted by the sheriff 
to the corporation commission, after deducting his cost as allowed 
by law, which he shall collect in addition to the penalty. 

C. S., s. 1J48; 1913, c. 198, ea. 1. 2, 3. 

Since the enactment of the Laws of 1921, chapter 40, the reports which 
under the Bevenne and Machinery Acta were made to the Tax Gommis- 
aion and to the Corporation CommiBBion are now made to the Conunjasioner 
of Reveune. 

80. Secretary of state may call for special reports. The secre- 
tary of state has power to call for special reports from corpora- 
tions, of the same character as their regular reports, at snch t^^ 



64 North Cabolina Corpoeation Code 

as he may deem the public interest requires, but no fees shall be 
charged for filing these special reports. 

C. a, a. 1149; Rev., b. 1153. 

81. Secretary t^ state to publish list of corporations created. 
The secretary of state shall annually compile and publish from the 
records of his office a complete alphabetical list of the original and 
amended certificates of incorporation filed during the preceding 
year, together with the location of the principal office of each in 
this state, the name of the agent in charge thereof, the amount 
of authorized capital stock, the amount with which business is to 
be commenced, the amount issued, the date of filing the certifi- 
cate, and the period for which the corporation is to continue ; but 
the secretary of state and the corporation coramission shall confer 
and arrange the statistics so as to prevent the same facts being 
embodied in the reports of both departments. 

C. S., B. 1150; Rev., b. 1244; 1901, c. 2, b. 104; 1911, c. 211, s. 10; 1913, 
e. 198, a. S. 

82. Liability of officers failinjr to maike reports or matdng false 
reports. If any of the officers neglect or refuse to make any re- 
port required of them by law for thirty days after written re- 
quest BO to do by a creditor or stockholder of the corporation, they 
are jointly and severally liable to- the person demanding such re 
port, for the amount of his debt if he is a creditor, or for the 
amount of his loss if he is a stockholder. If any report or certifi- 
cate made, or any public notice given, by the officers in pursuance 
of the provisions of this chapter, is false in any material represen- 
tation, all the officers who signed the same, knowing it to be 
false, are jointly and severally liable for all the debts of the cor- 
poration contracted while they were stockholders or officers there- 
of, as a penalty enforceable in the courts of this state only. 

C. S., 8. 1151; Bev., bb. 1154, 1163; 1901, c. 2, ea. 27, 56. 

83. Liability for fraud. In case of fraud by the president, di- 
rectors, managers, or stockholders, in a corporation, the court 
shall adjudge personally liable to creditors and others injured 
thereby the directors and stockholders who were concerned in the 
fraud. 

C. S., B. 1152; Hev., b. 1155; Code, a. 688; 1901, e. 2, a. 107. 

Oorporatlons gSlO. Irreapcctive of their actual koowledgs of a corpora- 
tion '8 condition, directors thereof are reBponBible for damages sastaiQed by 
Btockholders by tbcir negligence, fraud or deceit, and are not excused, by 
their good faith alone, for lack of proper care, attention and eirciunspection 
in conducting the corporate affairs, which is exacted of them ob trusteea. — 
Anthony v. Jeffresa, 172 N. C. 378, 90 S. B. 411, /■ •■ r 

.HZ^dbX-OO^IC 



NOBTH Cakouna Cobporatiom CoiM; 65 

OorporaUons § 310. Although directors of corporations are not expeeted 
to attend to current business, thej must at thoir peril give such attantton to 
and ao manage the affairs of the company that they may he able at alt 
times. to know what their executive officers, agents and fellow directors are 
doing, and they are liable to the corporation or its legal representativeB 
for loBses occasioned by a breach of such dutv. — Besselieu v. Browo, 177 
N. C. 65, 07 S. E. 743. 

Corporations g310. Directors of a corporation are not liable for loss to 
the corporation, resulting from honest mistakca made in the exercise , of 
their authority, or for mistakes of subordinate officers.— Bras well v. Pam- 
lico las. t Banking Company, 159 N. C. 62S, 75 S. E. 813. 

84. Joint and several liability of officers, etc.; contribution. 

When The officers, diroetora or stockholders of a corporation are 
liable to pay its debts, or any part thereof, any person to whom 
they are liable has aTight of action against any one or more of 
them. And any such officer, director or stockholder has the right 
of equitable contribution in any action for that purpose against 
any other officer, director or stockholder who is liable with him 
for any amount which he has been compelled to pay as provided 
in this section. 

C. S., 8. 1153; Hev., s. 1150; 1901, c. 2, a. 90. 

Corporations 6336. Where a corporation engaged in the buaiiiens of 
commission merchant misapplies proceeds of goods soid on consignment, its 
officers, who knowingly participated in the wrong, are individually liable, 
and may be sued jointly or severally. — Cone v. United Pruit Growers Asa 'n, 
171 N. C. 5S0, 88 S. E. 860. 

Corporations g 357. Defendants were properly joined in an action for 
their joint wrong as officers of a corporation in misajipropriating plaintiff's 
money and notes. — Virginia-Carolina Chemical Company v. Floyd, 158 N. C. 
455, 74 S. E. 465. 

Oorporationa g333. A clause in a corporation's articles, providing that 
no stoeSholder shall be liable for the debt, default or tort of any other 
stockholder, did not relieve stockholders who were also directors from lia- 
bility for a joint tort or misfeasance in office, consisting of a wrongful sale 
of all the corporation's assets, for their individual benoBt. — Mclver v. 
Toung Hardware Company, 144 N. C. 478, 57 S. E. 160. 

86. Officers paying may enforce exoneration against corpora- 
tion. An officer, . director or stockholder who pays a debt of a 
corporation for which he is made liable by the provisions of this 
chapter may recover the amount paid, in an action against the 
corporation for money paid for its Use, in which action only the 
property of the corporation is liable to be taken, and not the 
property of any stockholder, except as provided in the preceding 
section. 

0. S., B. 1154; Bev., s. 1157; 1901, c. 2, s. 91. 

86. Assets of corporation first exhausted. No sale or other sat- 
isfaction shall be had of the property of a director or stockhpldw 



66 North Carolina Corporation Code 

for a debt of the corporation of which he is director or stockholder 
until judgmeDt be obtained therefor againat the corporation and 
exeeutioa thereon returned unsatisfied, or untiT it is shown to 
the court that the corporation has no property available for the 
satisfaction of the indebtedness. 

C. a., B. 1165; Bev., a. 1158; 1901, c. 2, b. 92. 

ART. 5. CAPITAL STOCK. 

87. Classes of stock. Every corporation has power to create 
two or more kinds of stock of such classes, with such designa- 
tions, preferences, and voting powers or restriction or qualifica- 
tion thereof as are prescribed by those holding ttro-thirds of its 
outstanding capital stock ; and the power to increase or decrease 
the stock as herein elsewhere provided applies to all or aay of the 
classes of stock ; and the preferred stock may, if desired, be made 
subject to redemption at not less than par, at a fixed time and 
price, to be expressed in the certificate thereof ; and the holders 
thereof are entitled to receive, and the corporation is hound to pay 
thereon, a fixed yearly dividend, to be expressed in the certificate, 
payable quarterly, half-yearly or yearly, before any dividend is 
set apart or paid on the common stock, and such dividends may 
be made cumulative. In case of insolvency, its debts or other 
liabilities shall be paid in preference to the preferred stock. No 
corporation shall create preferred stock except by authority given 
to the board of directors by a vote of at least two-thirds of the 
stock voted at a meeting of the common stockholders, duly called 
for that purpose. The terms "general stock" and "common 
stock" are synonymous. 

C. S., B. 1158; Eev., s. 1159; 1901, c. 2, b. 19; 1903, e. 660, u. 2, 3. 

Oorponitiotu §666. A preferred .at or hh older of a corporatiou is not a 
ereditor of the corporation, and must be confined to hiB rights as a Btock- 
holder.— Weaver Power Company v. Elk Mountain Mill Company, 154 N. C. 
76, 69 S. E. 747. 

OoTporatlotia g 228. Subscriptiona to the capital stock of a corporation 
oonBtitute a trust fund for the protection and secnrity of its creditors. — 
Goodman v. White, 174 N. C. 399, 93 S. E. 906. 

NOTE. Care should be taken in the preparation of the resolution, 
authorlEing the issue of preferred stock, as well aa in the preparation of 
the certiGcate of auch stock; otherwise a situation may be created whereby 
the rights inherent to the various claasea of atock may be other than 
eontemplated when the preferred stock waa authorized and ieaued. 

If the preferred stock be cumulative, auch fact should be definitely stated. 
Likewise, if it be non-cnmulative, this should be explicitly stated. If it be 
enmulative, and the desire be to have unpaid accumulations of dividends 
draw interest, thia ahonid be atated. If the contrary be the purpose, it 



should be atated that the cumulation should not bear inteieat. 



v)0' 



.^Ic 



North Caeolina C3oeporation Code 67 

It ihonld be atsted definite!;? whether tbe ptefereDce applies only to 
ekmingi while the company continues in buainets; or whether it also ear- 
riea preference to the sssels, so that, in any diiaolation or final distribution 
of the asseta of the company, the preferred stock shsill have priority over 
the common stock, not only as to dividends but also iU the distribution of 
the aweta; eo that the preferred etoek will be redeemed or retirsd at full or 
at par ploj aeeomntated and unpaid diyidends with interest, if such be the 
attribntes of the stock before any distributioD be made to the common 
■toek. 

Care should be taken that both resolution and certificate of stock shall 
state definitely whether the dividends to be paid on the preferred stock 
■IibU be all to which that stock shall be entitled during the life of the com- 
pany, bearing in mind that unless otherwise stated, all shares of stock are 
on an equality. 

It will not be difficult to find cases where the preference provided for in 
leaolatipu and certificate can be constmed merely into a priority of pay- 
ment, and not a limit upon the amonnt of payment. For instance, a com- 
pany may authorize and issue 7% preferred stock. The lesoJution and cer- 
tificate may state that the holder of the preferred stock shall be entitled 
to receive, and the company sball be obligated to pay out of the profits and 
earnings, an annual dividend of 7% before any payment shall be made to 
tlie holders of the common stock. If nothing further be stated, it migCt 
well be argued that the extent of this preference is that the holder of the 
preferred stock should be paid 7% dividend before anything be paid to the 
common stock. 

Bat the company becomes prosperous. Not only ia 7% paid upon the pre- 
ferred stock, but 7% and more is paid upon the common stock. The terms 
of the resolution and of the certificate have been complied with — 7% baa 
been paid upon the preferred stock, and 7% has been paid upon the com- 
mon stock. There still remains a large sum to be distributed. Now, does 
this surplus go entirely to the holders of the common stock; or do the 
holders of the preferred and of the common alike share in this surplnsf 

If ench be the intention, it should be so stated in resolution and certifi- 
cate. If it ie not the intention to allow both common and preferred stock- 
holders to share in the dividends after 7% shall bat/e been paid upon all 
the st6ck, then that fact shoutd be set forth so plainly in both resolutions 
and certificate that there may be no controversy. 
Some formula like the following is snggcsted: 

"The holders of the preferred stock shall be entitled to be paid from 
the surplus earnings of the company, and the company shall be obli- 
gated to pay to the holders of the preferred stock out of its surplus 
earnings, an annual dividend of 7%, payable (annually, semi-annually, 
or quarterly, as the case may be) before any dividend shall be paid to 
tbe holders of the common stock. After tbe payment of such divi- 
dends on the preferred stock, and after retaining sufficient property at 
all times to provide for the redemption of all the preferred stock out- 
standing, all the other earnings of the company shall belong to and 
be payable to the holders of the common stock; and the only svms 
which shall be paid to the holders of the preferred stock shall be the 
dividends provided therein, and the redemption of the stock at par, jf 
the company be dissolved; or tbe redemption of said stock plus the 
premium thereon provided, in such case, if the stock be retired prior 
to the dissolution of tbe company." 

88. Issnance of capital stock of corporations without par value. 
Any corporation heretofore or hereafter organized under the lawa 



68 North Gaeolina Cobporation Code 

of this state, except banks, trust companies, railroad companies 
and inaorance companies, may, in its original certificates of incor- 
poration, articles of association, or any amendment thereof, create 
shares of stock with or without nominal or par vlane, and may 
create two or more classes of stock or debentures, with such pref- 
erences, voting powers, restrictions and qualifications as shall- 
be fixed in such certificate of incorporation, articles of asso- 
ciation or amendment thereof. Subject to any provisions so 
fixed, every share without par value shall equal every other such 
share. 

2. The provisions of law relating to the issuance of stock with 
par value shall apply to the issuance of stock without nominal or 
par value, and such corporation may issue its authorized shares 
without nominal or par value, for cash, property, tangible or in- 
tangible, services or expenses, as may be determined from time 
to time by the board of directors, subject to the provisions of the 
certificate of incorporation, article of association, or amendments 
thereof, and in case of increase in capital stock, subject to such 
vote of stockholders, as is now or may hereafter be fixed by law, 
determine the terms and manner of the disposition of the increased 
stock pursuant to section one thousand one hundred and thirty- 
one of the Consolidated Statutes of North Carolina, and when the 
cash or other consideration for which they are to be issued, as 
stated in the certificate of incorporation, articles of association or 
amendments thereof, has been received, such shares shall be fully 
paid stock and not liable to any further call or assessment thereon, 

' :i!l the subscriber or holder be liable for any further pay- 
ments. 

3. In any case in which the law requires that the par value of 
the shares of stock of a corporation be stated, it shall be stated, 
in respect of shares without nominal or par valiie, tiat aach 
shares are without nominal or par value, and wherever the amount 
of stock authorized or issued, is required to be stated, if any shares 
without nominal or par value are authorized, the number of 
shares authorized or issued of the several classes shall be stated, 
and it shall also be stated whether such shares are with or without 
nominal or par value and what hte par value is of such shares 
as have par value. 

4. Any sueh corporation heretofore organized, whether under a. 
special act of legislature or otherwise, may amend its certificate 



NOETH Carolina Corporation Code 69 

of iDcorporation, so as to change ita certificates of stock from 
certificates with par value tO' certificates withoHt b^mioal or par 
value, or vice versa. 

5. The tax upon the certificate of ineorporation, or extension or 
renewal or corporate existence, or increase of capital stock with- ' 
out nominal or par value, shall be the same as if each share of 
stock had a par or face value of one hundred dollars. 

6. The intent and purpose of this act is to require a share of 
stock to be treated and represented, subject to lawful preferences, 
rights, limitations, privileges and restrictions, as a mere evidence 
of an aliquot part or divisional interest in the assets and earnings 
of the corporation issuing the same, whatever the extent or value 
of such assets or earnings may be, to the end that misrepresenta- 
tion or misunderstanding arising through the difference between 
actual value of a share of stock and the value appearing on the 
face of the certificate therefor may be eliminated. 

.7. Except as otherwise provided by this act, corporations issu- 
ing shares without any par or face value under the provisions 
hereof, shall be and remain subject to the laws of the state now 
or hereafter in force relating to the formation, regulation or reor- 
ganization rights, powers and privileges of such corporation and 
all other laws applicable thereto. 

8. That all laws and clauses of laws in conflict with this act are 
hereby repealed. 

1921, t. lia. 

89. Stock to be paid in money or money 's worth ; issne for labor 
or property. Nothing but money shall be considered as payment 
for any part of the capital stock of any corporation organized 
under this chapter, except as herein provided in case of the pur- 
chase of property or labor performed. Any corporation may 
issue stock for labor done or personal property or real estate or 
leases thereof, and, in the absence of fraud in the transaction, the 
judgment of the directors as to the value of such labor, property, 
real estate or leases shall be conclusive. 

C. S., ■. 11S7; Rev., bb. 1159, 1160; 1901, e. 2, m. 19, S3; 1903, c. 660, aa. 
2, 3. 

CoipoiatlonB g 232. A valuation of property taken in payment for lub- 
■cription to capital stock, wliich is grottsly exi'easive and knowingly made, 
ii a frand on the creditors who may proeeed ajjainst the stockholder as for 
an unpaid subscription.— Goodman v. White, 174 N. C. 399, 93 S. E. 906. 

Oorporatlona §282. A groaaly excessive valaation of property received 



70 North Cakolina Corporation Code 

in pftTmeiit of stock knowingly made may be conclusive OTideuce of fraud. — 
Whitloek v. Alexander, IGO N. C. 465, Te S. E. 638. To the aame effaet.— Hob- 
good V. EUen, 141 N. C. 344, 63 8. £. 607. 



90. Stock issued for property; how value ascertained; how 
stock reported. Any corporation formed under thiB chapter may 
purchase any property necessary for its business, and issue stock 
to the amount of the value thereof in payment therefor. The 
stock 80 issued shall be full-paid stock, and not liable to any fur- 
ther call, nor shall the holder thereof be liable for any further 
payment under any of the provisions of this chapter ; and in the 
absence of actual fraud the judgment of the directors as to the 
value of the property shall be conclusive. In all statements and 
reports of the corporation to be published or filed, this stock shall 
not be stated or reported as being issued for cash paid to the 
corporation, but shall be reported in this respect according to the 
facts. 

C. B,, B. 115S; Rev., e. 1161; 1901, o. 2, ». 64. 

COTpolAtions 8269. Stockholder, paying for stock with property, hai 
burden of showing that the property waa taken at its troe Value, and 
that such value was approved by board of directors, acting independent!; 
in the interest of the corporation. — Qoodman v. White, 174 N. C. 399, 98 
8. E. 906. 

OorpOEatlons g232. A valuation of property taken in payment for anb- 
BcriptioA to eapital stock, which is grossly excessive and knowingly made, 
is a fraud on the creditors who may proceed against the stockholder as tot 
an unpaid subscription.— Goodman v. White, 174 N. C. 399, 93 8. E. 906. 

OoTporatlons §269. Evidence that corporation formally valued a patent 
and accepted it in payment of stock held competent to show that the atock 
was not unpaid.— Whitloek v. Alexander, 160 N. C. 465, 76 S. E. 638. 

Oorporatlons §271. Evidence held to make a 
whether patents tranaterred to a corporation i 
worth the par value of the stock. — Ibid. 

91. Construction companies building railroads, etc., may take 
stock therein; how issued, valued, and reported. Corporations 
having for their object the building or repairing of railroads, 
water, gas or electric works, tunnels, bridges, viaducts, canals, 
hotels, wharves, piers, or any like works of internal improvement 
or public use, may subscribe for, take, pay for, hold, use and dis- 
pose of stock or bonds in any corporation formed for the purpose 
of constructing, maintaining and operating any such public 
works; and the directors of any such corporation formed for the 
purpose of constructing, maintaining and operating any public 
work of the description aforesaid may accept in payment of aiiy 



NORTH Carolina Corporation Code 71 

such subscriptioD, or purchase, real or personal propertj-, neces- 
sary for the purposes of such corporation, or work, labor and serv- 
ices performed, or materials furnished to, op for, such corporation 
to the amount of the value thereof, and from time to time issue 
upon any such subscription or purchase, in such installments or 
proportions as such directors may agree upon, fuU-paid stock, in 
full or partial performance of the whole, or auy part uf such sub- 
scription or purchase, and the stock so issued ^all be full-paid 
stock, and not liable to any further call, nor shall the holder 
thereof be liable for any further payments. And in all statements 
and reports of the corporation to be published or filed, this stock 
shall not be stated, or reported, as being issued for cash paid to the 
corporation, but shall be reported and published in this respect 
according to the fact. 

0. 8., 1. use; Rev., i. 1172; 1»01, c. 2, s. S5. 

93. Liability for unpaid stock. Where the capital stock of a 
corporation has not been paid in and the assets are insufficient to 

satisfy its debts and obligations, each stockholder is bound to pay 
on each share held by him the sum necessary to complete tli« 
amount of such share, as fixed by the charter, or such proportion 
of that sum as is required to satisfy such debts and obligations ; 
but no person holding stock in any corporation in this state aa 
executor, administrator, guardian, or trustee, or as collateral 
security, is personally subject to any liability as a stockholder of 
the corporation ; but the person pledging the stock is considered 
as holding the saiqe, and is liable as a stockholder accordingly, and 
the estate and funds in the hands of such executor, administrator, 
guardian, or trustee, is liable in like manner, and to the same ex- 
tent, as the testator or intestate, or the ward, or the person in- 
terested in such fund, would have been had he been living and 
competent tn act and to hold the stock in his own name. 

C. 8., s. llfiO; Rev., s. 1182; 1893, e. 471; 1901, c 2, a. 22. 

Oorponitlotu gSZS. Subscriptions to capital stock of a corporattoa eon- 
■titnte a trust fund for the protection and security of its creditois. — Qood- 
mmn v. White, 174 N, C. 300, B3 S. E. 906. 

Corporations g 247. Debts due by corporation are not abroga.ted, because 
tt abandons corporate enterprise, and unpaid Bubscriptions to stock con- 
tinne to be assets of the corporation, a trust fund to which creditors may 
resort. — Raleigh Improvement Conipnny v. Andrews, 176 N. C. 280, 96 
8. K 1032. 

eorpowtlons g22B. Sums due on eubacriptiona to stock constitute a trust 
fund for the benefit of creditors.— Bernard v. Carr, 167 N. C. 481, 83 8. B. 
816; Whitlock v. Alexander, 160 N. C. 465, 76 S. E. G3B. 

I stock dividend 
Btablished, — Ibid. 

.oogfc 



72 NoETH Carolina Cobpoeation Code 

OorjporatloDS gSO. In a receiver's action to collect unpaid stock sub- 
scriptions, a subscriber cannot set-off a debt dne him by the corporation. — 
Vaughn-Bofcertson Drug Company v. Grimes-Mills Drag Co., 173 N. C. S02, 
92 8. E. 376. 

Oorpoistlons g 90. In an action on a stock subscription, evidence held to 
require submission to the jury to the question whether defendant had been 
released from his subseriptiou during the organization of the corporation by 
the consent of all the other subscribers before any rights of creditors had 
arisen.— Boushall v. Myatt, 167 N. C. 328, 83 S, E, 352, 

Oorporatloas §228. Stockholders of an insolvent corporation are liable 
pro rata for their unpaid subscriptions to amount necessary to liquidate the 
corporate debts.— CI ay poo le v. Mcintosh, 182 N. C, 109, 108 S. E. 433. 

93. Decrease of capital stock. The decrease of capital stock 
may be effected by — 

1. Retiring or reducing any class of the stock. 

2. Drawing the necessary number of shares by lot for retire- 
ment. 

3. The surrender by every stockholder of his shares and the 
issue to him in place thereof of a decreased number of shares. 

4. The purchase at not above par of certain shares for retire- 
ment. 

5. Retiring shares owned by the corporation. 

6. Reducing the par value of shares. 

When a corporation decreases the amount of its capital stock 
as above provided, the certificate decreasing the same shall be ptib- 
liahed at least once a week for three successive weeks in a newspa- 
per published in the county in which the principal oiBee of the 
corporation ia located, the first publication to be made within 
fifteen days after the filing of the certificate. In default of such 
publication the directors of the corporation are jointly and sev- 
erally liable for all debts of the corporation contracted before the 
filing of tho certificate, and the stockholders are also liable for 
such sums as they respectively receive of the amount so reduced. 
No such decrease of capital stock decreases the liability of any 
stockholder whose shares have not been fully paid, for debts of 
the corporation theretofore contracted. 

C. a, s. 1161; Bev., a. 1164; ISOl, c. 2, s. 33. 

Oorpotations §67. While notice- of the reduction of capital stock is nec- 
essary to afford stockholders protection against creditors, a reduction with- 
out notice, if otherwise valid, is enforceable by the corporation against its 
members. — Misenheimer v. Alexander, 162 N. C. 227, 78 8, E. 161. 

Oorpoifttloiu §07. No part of capital stock can be withdrawn for the 

DiclzedbyCoO^IC 



North Carolina Corporation Code 13 

purpose of reimbursing the priueipal of the capital stock until the debts of 
the coTporation ate paid.— Weaver Power Compdny t. Elk Hountaia Mill 
Co., 1S4 N. C. 76, 69 8. E. 747. 

OorporaUons §S7. An agreement made by the ahaieholders of a corpora- 
tion, between themselves, to retire any of its stock before settling with the 
corporation's creditors, is void as against the rights of the unpaid cred- 
itors.— Pender V. Speight, 150 N. d 612, 75 S. E. 851. 

Oorporatloiu g 244. An insolvent corporation cannot buy in Its own 
stock, and if it becomes insolvent after such parch&se, the stockholder i> 
held liable to the creditor for tlio purcliase moiiev rei'cived bv him. — Heggie 
T. Peoples Building & Loan Asa 'n, 107 N. C. 581,' 12 8. E. 275. 

t buy in or deal in its own stock 

94. Certificates and duplicates. Every stockholder shall have a 
certificate signed by the president and treasurer, or secretary, 
certifying the number of shares owned by him. A corporation may 
iasne a new certificate of stock in the place of any certificate then- 
tofore issued by it, alleged to have been lost or destroyed, and the 
directors authorizing such issue of a new certificate may require 
the owner of the lost or destroyed certificate, or his legal repre- 
sentatives, to give the corporation a bond, in such sum as they 
may direct, as an indemnity against any claim that may be made 
against the corporation. A new certificate may be issued with- 
out requiring any bond when, in the judgment of the directors, 
it is proper to do so. 

C. S., s. 1162; Eev., eb. 1165, 1166; 188S, c. 265; IBOl, c. 2, s. 64. 

Oorporatlotu §91. A'certificatc for shares of stock is not the stock it- 
self, but constitutes only prima facie evidence of the ownership of a num- 
ber of shaceB.~Misenheimer V. Alexander, 162 N. C. 227, 78 S. E. 161. 

Gorporattons §94. Subscribing or registering of a stockholder's name on 
the stock book opposite the number of shares for which be has subscribed 
confers title thereto, and makes him a stockholder without the issuance 
of certificates. — Powell Bros, v, McMullan Lumber Company, 153 N. C. 52, 
68 S. E. 926. 

Corporations §94. Stock of a corporation is capital, and tbe stock cer- 
tificate only evidences that the holder has invested his means as a part of 
the capital.— Weaver Power Company v. Elk Mountain Mill Co., 154 N. C. 
7fl, 69 8. E. 747. 

OoTporatlons § 109. The method regulating the mamier of reissuing cer- 
tificates of stock of an incorporated company where the same have been 
lost, and requiring an indemnity bond from the person asking a reissue of 
a lost certificate, and permitting a retention of the reissued certiflcate by 
the company's treasurer for five years, as a further safeguard, is a general 
provision applicable to all corporations. — Hendon v. North Carolina R. Com- 
pany, 125 N. C. 124, 34 S. E. 227. 

Oorporatioiu §92. Tender of certificate is not necessary before insti. 
tuting suit on note given for stock. — Virgin Cotton Mills v. Abernathy, 115 , 
N, C. 402, 20 8. E. 523. OOQlC 



74 North Caeouna Corpoeation Code 

96. Action to compel iasoance of duplicate cartiflcates. When 
a corporatioD has refused to issue a new certificate of stock in 
place of one theretofore issued by it, or by a corporatioti of 
which it is a successor, alleged to have been lost or destroyed, the 
owner of the lost or destroyed certificate or his legal representa- 
tives may maintain a civil action' in the superior court of the 
county in vehich the principal office of the corporation is located 
to compel the corporation to issue a duplicate certificate in the 
place of the one alleged to have been lost or destroyed ; and if the 
issues of fact arising upon the pleadings are found in favor of the 
plaintiff, the court shall make an order requiring the corporation 
or other party, within such time as it designates, to issue and de- 
liver to the plaintiff a new certificate for the number of shares 
of the capital stock of the corpration which have been found to 
be owned by the plaintiff. In making the order the coiirt shall di- 
rect that the plaintiff deposit such security as to the court appears 
sufficient to indemnify any person other than the plaintiff, who 
shall thereafter appear to be the lawful owner of such certificate 
stated to be lost or destroyed; and the court may also direct pub- 
lication of such notice, either preceding or succeeding the making 
of such final order, as it deems proper. Any person who there- 
after claims any rights under the certificate so lost or destroyed 
shall have recourse to said indemnity, and the corporation shall 
be discharged from all liability to such person by reason of com- 
pliance with the order. 

C. S., B. 1163; Rev., b. 1167; 1901, p. 2, a. 95. 

Gorporations g lOS. Where, in an action agflioBt a railroad company, 
the lose of a certificate of stock in said companj ib alleged, and reitaue of 
the same is asked, a denial of the allegation of toss raises a question of 
fact to be detecmined bv the jury. — Hendon v. North Carolina B, Com- 
pany, 125 N. C. 134, 34 8. E. 227. 

96. Transfer of shares. The shares of stock in a corporation 
are personal property, and are transferable on the books of the 
corporation in the manner and under the regulations provided by 
the by-laws. Whenever a transfer is made for collateral ■security, 
and not absolutely, it shall be so expressed in the entry of the 
transfer. 

C. S., B. 1164; Bev., e. IieS; Code, s. 68D; 1901, c. 2, ■. 21. 

OorpOTstlons 866. Shares of stock In a foreign corporation are personal 

property, a-' — t-— ->-- ■■ — ■ ■>-■- -.-■- -- .- ->-' ■ ™- .. 

V. Commiss 
N. C. 420. 

OoriioratlotlS B 66. Shares of stock in an incorporated company may l>e 
taxed, as a distinct species of property, belonging to the holder, indepen- 
dently of the taiatioD imposed upon the value of the franchise and upon 



North Carolina Corporation Code 75 

the real ftnd peraonsl estate of the eorporatioa Itself.^Bela t. CamniU- 
eionerB of Forsyth County, 83 N. C. 415. See diicuMion of doable taxation 
on Page 498. 

OorponUoiis g 128. The holder of stock ai pledgee haa prieritj over a 
snhaeqaent attachment, though the transfer to pledgee was not entered on 
the corporation booka.— Bleaklej t. Candler, 169 N. C. IS, 84 8. E. 10S9. 

«orpoT«Uoiu §128. The purpose of regiitration is to prevent frandnlent 
transfers, determiiie membership, the right to vote, the right to partici- 
pate in the management of the eorpoiation, and the pavment of dividends. — 
Ibid. 

CorpOtfttlOIU § 128. The by-laws of a corporation requiring transfers of 
stock on the books of the corporation, it is generally nndergtood, are made 
for the purpose of protecting the corporation, and has no effect apon the 
legal trnnsfer of the ownership of the stock. — Mitchell v. Aulander Bealtj 
Company, 169 N. C. 518, 88 8. B. 368. 

OorporatlOIU gl2S. Where a corporation negligently allows its Stock, 
dnly made out to an individual, to fall into the hands of the Individual, 
who pledges it to a bona fide pledgee for value, the latter acquires title as 
against the corporation. — American National Bank v. Dew, 175 N. C. 79, 
94 8. E. 708. 

OorponttiolU g 131. Where a corporation is requested to transfer stock 
by an agent, it must ascertain the agent's authority from his power of 
■ttomey.— Baker v. Atlantic Coast Line B. Co., 173 N. C. 365, 82 8. E. 170. 

Oontncta gl21. An agreement between stockholders holding a majority 
of the shares to pool their stock by transferring it to trustees, and authoriz- 
ing them to vote all such stock at corporate meetings, and to pledge it as 
collateral for loans, is void, as against public policy. — Harvey v. LinviUe 
Improvement Company, 118 N. C. 693, 24 8. E. 489. 

Contract! g 121. Any agreement, which separates the beneficial owner- 
ship of corporate stock from the legal title, is contrary to public policy 
and void, and restrictions on the right to vote stock are not favored by 
courts. — gheppard v. Rockingham Power Co., 150 N. C. 776, 64 S. E. 894. 

Oorpoiatlons 8113. There being no statute to the contrary and the sec- 
retary of state being authorized to grant corporate charters by virtue of 
Const., Art. 8, 8ec, 1, a provision in a charter to a telephone company 'that 
shares of the stock therein should not be transferred or sold until reported 
to and approved by the directors was valid, and a purchaser was not 
entitled to enforce a transfer over the action by the directors in good faith, 
—Wright V. Iredell Telephone Co., 182 N. C. 308, 108 S. E. 744. 

97. Asaessments, sale, and notice. The directors of a corpora- 
tion may, from time to time, make assessments upon the shares 
of stock subscribed for, not exceeding, in the whole, the par value 
thereof, remaining unpaid; and the sums assessed shall be paid 
to the treasurer at such times and by such installments as the 
directors direct, the directors having given thirty days notice of 
the assessment and of the time and place of payment, either per- 
sonally, by mail, or by publication in a newspaper published in 
the county where the corporation is established. If the owner of 
any share or shares neglects to pay a sum assessed thereon for 
thirty days after the time appointed, for payment, the treasiuarj,. 



76 North Carolina Cobpobation Code 

when ordered by the board of directors, shall sell, at public auc- 
tion, such share or shares of the delinquent owner as will pay any 
assessment due from him, with interest, and all necessary inci- 
dental charges," and shall transfer the share or shares sold to the 
purchaser, who is entitled to a certificate therefor. The treasurer 
shall give notice of the time and place appointed for the sale, and 
of the sum due on each share, by advertising the same once a 
week for three successive weeiss before the sale in a newspaper 
published in the county where the principal office of the corpora- 
tion is located, at the courthouse door, and by mailing a notice 
thereof to the last hnown postoffice address of the delinquent 
stockholder. 

C. S., e. 1165; Rev., as. 1169, 1170, 1171; 1901, c. 2, bs. 23, 24, 2S. 

Corporations §93. The by-laws of a corporation provided that, if any 
stockholder failed to pay hia installment on stock subsiription when called 
bj the directors for two months, his stock be declnred forfeited, and sold 
for his account, publicly, after 30 days' notice, and the net proceeds be 
applied first to the payment of alt amounts due on his stock, and the bal- 
ance paid to hiin: Provided, that the forfeiture and sale of stock of a de- 
linquent Khould not ridense him from his subscription. Held, that such by- 
law was reasonable, and a subscriber whose stock was duly advertised and 
told nnder such by-law, after notice by mail, had no right to complain; tbe 
law cmrowering oorporatlona to provide by their by-laws, inter alia, "the 
mode of Belling shares for non-payment of assessments. "—Elizabeth City 
Cotton Mills V. Duustan, 12! N. C, 12, 27 S. E. 1001. 

Oorporatiana §93. Where plaintiS's stock io defendant's corporation 
was wrongfully sold at public sale for non-payment of a, call, he was entitled 
to treat the sale as invalid, and compel the corporation to issue similar 
stock to him, on payment of the amount of the call, with interest to the date 
of the tender and cost bf advertisement to that date. — Wilson v. Duplin Tol. 
Co,, 139 N. C. 395. 52 8. B. 62, 

98. One corporation may purchase stock, etc., of another. A 
corporation may purchase stock, securities or other evidences of 
indebtedness created by any other corporation or corporations of 
this or any other state, and while owner of such may exercise all 
the rights, powers and privileges of ownership. 

C. 8., 8. 116G; Bev., s. 1173; 1903, c. 660, a. 3. 

The former rule, stated in Meares v. Monroe Land & Improvement Co., 
126 N. C. 602, 36 S. E, 130, was that a corporation could not hold stock in 
another corporation unlesa charter so provided. 

09. Mutual corporations may create stock. A mutual corpora- 
tion, upon the consent in writing of all its members, may provide 
for and create a capital stock and may provide for the payment 
of the stock, and fix and prescribe the rights and privileges of the 
stockholders therein not inconsistent with law. 
C. a, 8. 1167; Bev., s. 1245; 1901, c. 2, a. 105. 

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North Carolina Cobpobation Code 77 

abt. 6. meetings, elections and dividends. 

100. Place of stockholders' and directors' meetings. The meet- 
ings of the stockholders of evel-y corporation of this state shall be 
held at the principal office in tliis state. The directors may hold 
their meetings, and have an office and keep the books of the cor- 
poration (except the stock and transfer boolcs) outside the state. 
Every corporation shall maintain a principal office in this state, 
and have an agent in charge thereof. 
C. 8., s. 1168; Bev., a. 1179; 1901, e. 2, b. 49. 

Oarporatlons §603. While a domestie corporation may be authorized to 
maiDtain an office at a place bcyoad tbc state, at which BOme corporate 
mcetiugs may be hcli), it is also required to maintain a prini:tpal ofHce in 
some county in thia state, which fixes its place of residence therein for tho 
purposes of suing and being sued. — Robersoo v. Ureenleaf- Johnson Lumber 
Co., 153 N. C. 120, 68 8. E. 1064. 

Oorpoiatlons §298. To make the proceedings of a meeting of the direc- 
lors of n corporutiou regular, it must be at a stated time jirovidud for itt tlie 
charter or by-laws or held after notice to all the directors. — First National 
Bank of Springfield v. Asheville Furniture * Lumber Co., 116 N. C. 827, 
21 8. E. 948. 

Comoratltms § 194. * Action taken at a called meeting of stockholders for 
a special purpose is not binding upon the corporation unless all stockhold- 
ers had notice of the mceting.—Asbury v. Mauney, 173 N. C. 454, 92 S. E. 
267. 

Corporations gl96. Where a stockholders' meeting is called for a special 
purpose, action on other business is void unless all stockholders consent or 
action is later ratified. — Ibid. 

Corporations gl97. Stockholders not represented at an original meet- 
ing were entitled to vote at an adjourned meeting. — Bridgers v. Staton, 150 
N. C. 216, 63 8. E. 892, 

OorporattoDS g 194. Notice to cnch of the members of a corporation of 
the time and place of holding the meeting of stockholders ia essential to the 
meeting, unless the stockholders are present in person or by prosy, or unless 
the time and place are definitely fixed by statute, charter or usage. — Hill v. 
Atlantic and North Carolina E. Co., 143 N. C, 539, 55 8. E. 854. 

Corporatloiu §194. In the absence of proof to tho contrary, it will be 
presumed that an annual or stated meeting of the stockholders of a cor.' 
poration was held in accordance with the requirements of the corporation's 
charter.— Ibid. 



101. Meeting called by three stockholders. When, for any rea- 
son, a legal meeting of the stockholders of any corporation cannot 
be otherwise called, three stockholders with voting power may 
call such meeting by publishing in a newspaper published in 
the county in which the principal office in this state is located ten 
days notice of the time, place and purposes of the meeting, and 

DidilzedbyCoO^IC 



7S NoBTH Cabolina Cobporation Code 

mailing this notice to all stockholders whose postoffice address is 
known or can be ascertained. A meeting so called is a legal 
meeting of the corporation, and if there are no officers present, 
the stockholders may elect officers for the meeting; ^nd the sec- 
retary of the meeting shall record the proceedings thereof in 
the minute book of the corporation. 

C. a, B. 1169; Hev., 8. 1100; 1901, c. 2, i. 51. 

102. Transfer and stock books. Every corporation shall keep 
at its principal and registered office in this state the transfer 
books, in which the transfer of stock shall be registered, and the 
stock books, which shall contain the names and addresses of th« 
stockholders, and the num.ber of shares held by them respectively, 
and shall at all times during the usual hours for business be open 
to the examination of every stockholder. These books shall be 
the only evidence as to who are the stockholders entitled to ex- 
amine them, and to vote at elections. In case the right to vote 
upon any share of stock is questioned, the stock hooks of the cor- 
poration shall be referred to, to aseer1:ain who are the stockhold- 
ers, and in ease of a discrepancy between the Dooks, the transfer 
book shall control and determine who are entitled to vote. 

C. 8., 8. 1170; Bev., as. 1180, 1181; 1901, c. 2, ss. 38, 45. 

103. Directors to produce books at election. The board of di- 
rectors shall produce at the time and place of elections the trans- 
fer books and the stock books, there to remain during the elec- 
tion, and the neglect or refusal of the directors to produce the 
same after a demand therefor shall render them ineligible to any 
office at such election. All elections of directors held under this 
chapter prior to February 28, 1913, where these books were not 
produced, and no demand was made therefor, are ratified and con- 
firmed and given full legal force and effect, but this ratification 
does not affect litigation pending on the above date. 

C. S., i. 1171; Eev., s. 1180; 1801, c. 2, a. 38; 1913, c. 14. 

104. Superior court may require production. The superior 
court may, upon proper cause shown, order any or all of tlie books 

of the corporation to be forthwith brought within this strife, and 
kept therein at such place and for such time as is d<isignated in 
such order. The charter of any corporation failing to comply with 
such order may be declared forfeited by the court making the or- 
der, and all its directors and officers shall he liable to be punished 
for contempt of court for disobedience of the order, 
C. a, s. 1172; Rev., b. 1179; 1901, e. 2, s. 40. 

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North Carolina Corporation Code 79 

105. Votes stookliolders entitled to; otUDnlatiTe voting. Unless 
otherwise provided in the charter or by-laws of a corporation, at 
every election each stockholder is entitled to one vote in person, 
or by proxy duly authorized in writing for each share of the 
capital stock held by him, but no proxy may be voted after 
three years from its date; nor may there be voted at any 
election a share of stock which has been transferred on the 
books of the corporation within twenty days prior to the 
election. The certificate of incorporation of any corporation 
Bntborized to issue shares of capital stock may provide that 
at all elections of directors, managers, or triiatees, each stock- 
holder is entitled to as many votes as equal the number of his 
shares of stock multiplied by the number of directors, managers, 
or trustees to be elected, and that he may cast all of his votes for 
a single director, manager, or trustee, or may distribute them 
among the mamber to be voted for, or any two or more of them, 
ss he sees fit. This right of cumulative voting may be exercised in 
the absence of charter provision when at the time of the election 
the stock transfer book of such corporation discloses, or it other- 
wise appears, that more than one-fourth of the capital stock of the 
torporation is owned or controlled by one person. A stockholder 
owning or controlling more than twenty-five per cent of the stock 
has the same right to vote cumulatively as any other stockholder ; 
and no amendment of the charter or by-laws of a corporation can 
abrogate or abridge any right herein conferred. The right to 
vote cumulatively cannot be exercised unless some stockholder 
announces in open meeting, before the voting for directors, tmg- 
tees, or managers begins, his purpose to exercise such right, and 
then every other stockholder may likewise vote cumulatively. 
C. a, 8. 1173; Bev., sb. 11S3, 11S4; IflOT, c. 457, s. 1; 1909, e. 827, a. 1. 
Contracts g 121. A voting trnet agreement botwcen the majority atock- 
liolders of a national hank to prevent the roritrol of a majority of the stock 
from paHsing by purchase to a Rtockliolder seemingly peraona non grata 
ii TOid aa against public policy. — Bridgera v. First National Bauk, 153 N. C. 
293, 67 S. E. 770. 

Contracts §121. Any agreement that separates the beneficial owner- 
sbip of corporatQ stoek from the legal title is pontniry to public poliey 
ajid void, and restrictions on the right to vote stock are not favored by 
Marts. — Sheppard v. Bockingham Power Company, 150 N. C. 776, 64 S. K. 
SS4. 

Corporations gl9B. A pooling agreement between the owners of a ma- 
jority of the stock of a corporation to last for ten years, the directors 
eieeted to be divided between the members of the pool, was contrary to 
pnblie policy and was void. — Bridgers v. Staton, 150 N. C. 216, 63 8. E. 

m. 

CoTporatlOIU glSS. Assignments of corporate stock for a period of years 

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80 NoBTH Carolina Corpoeation Code 

with anthoiity to vote, reserving tbe right to the assignors to draw all 
dividends tbereon during such period and the possession of the atoek, 
operated as a proxj only, and were invalid after three yeara. — Ibid. 

Oorporationa ^200. The right of a atoclcbolder to vote cumulatively 
cannot be exercised on a. single proposition, such as the question of ad- 
journinent. — Ibid. 



106. Stock held 1^ fiduciary, pledgor, life tenant, or xorpora- 
tioiL Every person holding stock as executor, administrator, 
guardian or trustee, or in any other representative or fidu- 
ciary capacity, may represent it at all meetings of the cor- 
poration, and may vote it as a stockholder, with the same effect 
as if the absolute owner thereof, unless the instrument creating 
the trilst provides to the contrary. Every person who has pledged 
his stock as collateral security may represent it at all such meet- 
ings, and may vote it as a stockholder, unless in the transfer to 
the pledgee on the books of the corporation he has expressly em- 
powered the pledgee to vote it, in which case only the pledgee or 
his proxy may represent and vote said stock. Where stock is 
owned by, or has been transferred on its record books to, one for 
life and remainder over, the life tenant at all meetings of the cor- 
poration may represent and vote the stock in person or by proxy, 
in the same manner and with the same effect as if he were the 
absolute owner thereof. Shares of stock of a corporation belong- 
ing to the corporation cannot be voted directly or indirectly. 

C. 3., s. 1174; Bev.. ss. 1185, 1186, 1187; 1901, e. 2, as. 42, 43; 1901, e. 
474, SB. 1, 2. 

Oorporations g 197. Where stook is bequeathed in trust to pay the in- 
come to ono for life, and ia to be held and controlled by the truatees with 
remainder to others, Rcviaal 1905, section 11R5, providing that a peraqn 
holding fiduciary stock as trustee may vote it, and not section 1186, pro- 
viding that, where stock is owned by one for life with remainder over, the 
life tenant may vote it, is controlling.— Haywood v. Wright, 152 N. C. 421, 
67 S. E. 082. 

Section referred to in Bridgora v. Sfaton, 150 N, C. 2la, fi3 S. E. 892, 
and Bridgere v. First National Bank, 152 N. C. 29S, 67 8. E. 770. 

107. Election of directors. All elections for directors shall be 
by ballot, unless otherwise provided in the charter, or by-laws, 
and a majority of the issued and outstanding stock must be pres- 
ent in person or by proxy ; the polls must remain open one hour, 
unless all the stockholders are present in person or by proxy and 
have sooner voted, or anless all the stockholders waive this pro- 
vision in writing; the persons receiving the greatest number of 
votes shall be the directors. 

C. S., s. 117S; Rev., a. 1182; 1901, c. 2, s. 39. 

'DidilzedbyCoO^IC 



North Caeolina Corpoeation Code 81 

Oorporatioiu gZSS. The requiiemeot that a majority of all the stock 
iiaued and outetandfag be present in peraoa or by proxy aa a condition to 
the election of diiectors of the corporation, remaining stockholderSj after 
the breaking of a qtioram, who controlled lesa than the majority of the 
Stock iMued and outstanding, could not hold a valid election of directore, 
though the adjournment, upon which occurred the departure of atockholders 
by which the quorum wub broken, was illegally voted. — Bridgers v. Staton, 
160 N. C. 216, 63 8. E. 892. 

108. Failure to hold election. If the election for directors of a 
corporation is not held on the day designated by the charter or 
by-laws, the directors shall cause the election to be held as soon 
thereafter as is convenient. No failure to elect directors at the 
designated time shall work any forfeiture or dissolution of the 
corporation; and if the directors fail or refuse for thirty days 
after receiving a written request for such election from those own- 
ing one-tenth of the outstanding stock, to call a meeting for the 
election, the judge of the district, or the judge presiding. in the 
courts of the district, in which the principal office of the corpora- 
tion is located, may, upon the application of any stockholder, and 
on notice to the directors, order an election or make such other 
order as justice requires. The proceedings governing the issuance 
and hearing of injunctions shall, as far as applicable, govern such 
hearing. 

C. 8., H. 1178; Bev., b. 1188; 1901, c. 2, s. 46. 

Corporations § 283. Where no directors bad been elected at the corpora- 
tion's regular meeting and the old directors fail or refuse for thirty daya to 
call a meeting for that purpose after receipt of a written request therefor 
from the owners of one-tenth of the outstanding stock, the court upon 
application of any stockholder and on notice to the directors may order nn 
election, or make any other order that justice mav require. — Bridgers v. 
StatOD, 150 N. C, 216, 63 S. E. 892. 

109. Jurisdiction of superior court over dections. The superior 
court judge, upon application of any person who may complain 
of any election, or any proceeding, act on matter pertaining to the 
same, ten days notice having been given to the adverse party, or 
to those who are to be affected thereby, of such intended applica- 
tion, shall proceed forthwith, at chambers, in any county in the 
district in which the principal office of the corporation is situated, 
to hear the affidavits, proofs and allegations of the parties, or 
otherwise inquire into the matter or causes of complaint, and 
thereupon establish the election complained of, or order a new 
election, or make any order and give any relief in the premises as 
right and justice require. The proceedings shall, as far as appli- 
cable, be the same as in injunctions. 

C. S., s. 1177; Hev., s. 1189; 1901, c. 2, s. 47. 

See Bridgers v. Staton, 150 N. C. 216, 63 S. E. 8B2. -, , 

,.:,.:) bX>OOg\C 



82 North Cabolina Corpoeation Code 

110. Wben dividend doclared. The directors of every corpora- 
tion created under this chapter shall, in January of each year, un- 
less some specific time for that purpose is fixed in its charter, or 
by-laws, and in that ease at the time so fixed, after reserving, over 
and above its capital stock paid in, as a working capital for the 
corporation, whatever sum has been fixed by the stockholdera, de- 
clare a dividend among its stockholders of the whole of its accu- 
mulated profits exceeding the amount reserved, and pay it to the 
stockholders on demand. The corporation may, in its certificate 
of incorporation or by-laws, give the directors power to fix the 
amount to be reserved as a working capital. 

C. 8., B. 1178; Rev., a. 1191; ISOl, c. 2, b. 52. 

OarporatiftlU §165. Where the word "dividend" is used without quali- 
fication and without explanation, it Bignifies dividends pavable in money. — 
LancftBteT TruBt Companj' v. Mason, 152 N. C. 660, 68 S. E. 235. 

OorpOtatlOIU § 167. The sale of stock with reservation of dividends pf 
certain dates reserves only cash dividends and a stock dividend would oot 
be included. — Ibid. 

111. Dividends from profits only; directors' liabili^ for im- 
pairing capital. No corporation may declare and pay dividends 
except from the surplus or net profits arising from its business,- 
or when its debts, whether due or not, exceed two-thirds of its 
assets, nor may it reduce, divide, withdraw, or in any way pay to 
any stockholder any part of its capital stock except according to 
this chapter. In case of a violation of any provision of this sec- 
tion, the directors under whose administration the same occurs are 
jointly and severally liable, at any time within eix years after 
paying such dividend, to the corporation and its creditors, in the 
event of its dissolution or insolvency, to the full amount of the 
dividend paid, or capital stock reduced, divided, withdrawn, or 
paid out, with interest on the same from the time such liability 
accrued. Any director who was absent when the violation occur- 
red, or who dissented from the act or resolution by which it was 
effected, may exonerate himself from such liability by causing his 
dissent to be entered at large on the minutes of the directors at 
the time the action was taken or immediately after he has had 
notice of it. 

C. a, a. 1179; Bev., b. 1192; Code, b. 681; 1901, c. 2, ss. 33, 52. 

Bankraptcr 8 145. Corpotate officers, who paid dividends when the debta 
exceeded two-thirds of the assets of the corporation, are liable to the tms- 
teo in bankruptcy for debts.— Claypoole v. Mcintosh, 182 N. C. 109, 108 
8. E. 433. 



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NOETH CAROLINA CORPOEATION CODE 88 

Oorpontlona g 67. Where the capital stock of a bank, has been impaired, 
although culled a diviaion of profitB, a division of funds among stockhold' 
«n, is a dividend of capital. Atty. Oea. v. Bank, 21 N. C. 545. 

OorpOTfttlons g 67. A corporation cannot settle witb its membeia by the 
application of assets to the retirement or redemption of the stork of tlia 
shareholders until it had first settled and discharged all its liabilities, and 
tnj agreement among the sbarebolderg looking to such atrangement will 
bs void as to creditors. — Heggie v. Peoples Building & Loan Ass'n., 107 
N. C. 581, 12 8. E. 275. 

Oorporatioos S 623. A eorporatian purchasing from the ofBcers uid 
stoekbolders of another corporation almost its entire assets, without provi- 
sion for the creditors, is, with such officers and directors, jointly and sever- 
ally liable to the receiver of defunct selling corporation for the amoujft 
necessary to pay the claims existing against it, interest and costs. — Mclver 
V. Young Hardware Co., 144 N. C, 478, 57 S. E. 169. 

GorpOTAtioliB g 67. The requirement of notice of the reduction of cap- 
ital stock necessary to afford stockholders protection against creditors, a 
reduction without notice, if otherwise valid, is enforceable by the eorpoia- 
tioii against its members. — Uiseuheimer v. Alexander, 162 N. C. 227, 78 
8. E. 161. 

ART. 7. FOREIGN CORPORATIONS. 

112. Fowen existing independently of permission to do biud* 
ness. A corporation created by another state of the United States, 
or by any foreign state, kingdom, or government may acquire by 
devise or otherwise, and may hold, mortgage, lease, and convey 
real estate in this state for the purpose of prosecuting its buoinesa 
or objects, or such real estate as it may acquire by way of mort- 
gage or otherwise in the payment of debts due to it, but is not 
eligible or entitled to qualify in this state as executor, adminis- 
trator, guardian, or trustee under the will of any person domiciled 
in this state atthe time of his death. The right to acquire, hold 
and convey real estate exists only where at the time of the acqui- 
sition, the foreign state, government, or kingdom under whose 
laws the corporation was created is not at war with the United 
States. 

C. 8., s. 1180; Bev., s. 1193; IBOl, c. 2, a. 93; 1915, c. 196, a. 1. 

OorporattoDB §661. A foreign corporation, incorporated to do business 
in North Carolina, and domesticated in that state by compliance with its 
laws, may sue therein, though it has no power to do business in the state of 
its incorporation. — Troy & North Carolina Gold Mining Company v. Snow 
Lumber Company, 173 N. C. 593, 92 S. E. 494; BarceUo v. Hapgood, 118 
N. C. 712, 24 8. E. 124. 

Cotporationa g 6S6. Articles of incorporation of company organized un- 
der the general incorporation laws of New York to conduct mining buBi- 
ness in North Carolina were not void on their face bev-ause New York 
gave company no authority to do business in New York.— Ibid. 



OoTporatlooB S631. In the absence of any prohibitive statute, 



W^ 



84 North Carolina Corpobation Code 

ration having its domicile of origin or creation in one state has, aa a mut- 
ter of comity, the right to carry on its corporate buaineBs and perform ico 
corporate functions in any other stnte.— Black well 'a Durham Tobacco 
Company v. American Tobacco Company, 145 N. C, 367, 59 S. E. 123. 

Corporations §664. So long as'forcigu corporations are permitted to be 
within the state either by compliance with the laws or as a matter of com- 
ity, they are entitled to have the laws of the laud administered so that 
they have equal protection and equal justice done them. — Ibid. 

See Pisher v. Traders' Mutual Life Insurance Co., 136 N. C. 217, 48 S. E. 
567; Shields v. Union Central Life Ins. Co., 110 N. C. 380, 25 S. E. 951. 

113. Requisites for permission to do business. Every foreign 
corporation before being pennitted to do bnsineas in this state, in- 
surance companies excepted, shall file in the ofBce of the secretary 
of state a copy of its charter or articles of agreement, attested by 
its president and secretary, under its corporate seal, and a state- 
ment attested in like manner of the amount of its capital stock 
authorized, the amount actually issued, the principal office in this 
state, the name of tlie agent in charge of auch office, the charac- 
ter of the business which it transacts, and the names and postoflice 
addresses of its officers and directors. And such corporation shall 
pay to the secretary of state, for the use of the state, twenty cents 
for every one thousand dollars of the total amount of the capital 
stock authorized to be issued by such corporation, but in no ease 
less than twenty-five dollars nor more than two hundred and fifty 
dollars; and also a filing fee of five dollars. Such corporation 
may withdraw from the state upon filing in the office of llie sec- 
retary of state a statement signed by its president and secretary 
and attested by its corporate seal, setting forth the fact that such 
corporation desires to "withdraw, and upon payment to the secre- 
tary of state of 'a fee of five dollars. Every corporation failing 
to comply with the provisions of this section shall forfeit to the 
state five hundred dollars, to be recovered, with costs, in an ac- 
tion to be pro.secuted by the attorney-general, who shall prosecute 
such actions whenever it appears that this section has been vio- 
lated. This section does not apply to railroad, banking, express 
or telegraph companies which, prior to March 9, 1915, had been 
licensed to do business in this state, or were engaged in business 
in this state, having a regularly appointed agent upon whom serv- 
ice of process could be made, located in this state. 

C. S., s. 1181; Ttev., s. 1194; 1901, p. 2, s. 57; 1903, c. 76; 1915, p. 2G3. 

Corporations g€57. A foreign eorpornlion's contract of sale is not in- 
validated, nor its right to recover the price lost, by its faiJurc to file papers, 
as required by section above, before being permitted to do business in the 
state; the statute merely imposing a penaltv for such failure. — G. Ober & 
Sons V. Katzenstein, 160 N, C. 43S, 76 S. E. 476. 



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North Carolina Corporation Cora; 85 

OOTporatloiu §636. The legislature hoe the power to prescribe the terms 
on wbich foTeign corporations may come into the state, hiiiI mny pass 
Btstntes for the protection of its own ritizenB doing businesa with them, ae 
against the objection that such etatutea diai'TiniiQate against nonreaidetita. — 
Williams v. Mutual Reserve Fund Life Ass'n, 145 N. C. 128, 58 8. E. 802. 

Corporatioiu 1 630. Theie is nothing in either the federal or state con- 
ititntion which prohibits the state, in the exercise of its police power, in 
order to prevent fraud and imposition, from requiring a license from for- 
eign corporations for doing business in the state. — State v. Agey, 171 N. C. 
8)1, 88 8. E. 726. 

CorpoiatloBS g 636. The State can impose burdens on foreign corporation 
as a conditioQ of its conducting business within the state, subject to re- 
striction that tax laws must not interfere with foreign or interstate eora- 
meree, or unjustly discriminate between different foreign corporations of 
the same elass.— Pittsburgh Life & Trust Co. v. Young, 172 N. C. 470, 90 
8. E. 568. 

Corporatioaa g $40. Corporation can exercise in jurisdiction other than 
that in which it is incorporated only anch powers as are set forth in its 
articles of incorporation. — Troy & North Carolina Gold Mining Co. v, Budw 
Lumber Co., 173 N". C. 593, 62 S. E. i94. 

ART. 8. DISSOLUTION. 

114. Volimtary, generally. When in the judgment of the board 
of directors, it ia deemed advisable and for the benefit of a eor- 
poration that it be dissolved, the board, within ten days after the 
adoption of a resolution to that effect by a majority of the whole 
board, at a meeting called for that purpose, of which meeting 
every director shall have received three days notice, shall cause 
notice of adoption of such resolution to be mailed to each stock- 
holder residing in the United States, to his last known postoffice 
address, and also, beginning within said ten days, cause a like 
notice to be published in a newspaper published in the county 
wherein the corporation has its principal office, at least once a 
week for four successive weeks, next preceding the time appointed 
for the same, of a meeting of the stockholders to be held at the 
office of the corporation, to take action upon the resolution. The 
stockholders' meeting thus called may, on the day appointed, by 
consent of a majority in interest of the stockholders present, he 
adjourned from time to time for not less than eight days at one 
time, of which adjourned meeting notice by advertisement in said 
■ newspaper shall be given. If at such meeting two-thirds in in- 
terest of all the stockholders consent in writing that a dissolu- 
tion take place, their consent, together with the list of the names 
and residences of the directors and officers, certified by the presi- 
dent and the secretary or treasurer, shall be filed in the office of 
the secretary of state, who, upon being satisfied by due pro( ' 



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J 



86 North Carolina Corforation Code 

that the requiremeats aforeBaid have been complied with, shall 
iBBue a certificate that the consent has been filed, and the board 
of directors shall cause thia certificate to be recorded in the office 
of the clerk of the superior court of the county in which the prin- 
cipal oiBee of the corporation is located, and published once a 
week for four successive weeks in a newspaper published in said 
county. Upon the filing In the office of the secretary of state of 
an affidavit of the manager or publisher of such newspaper that 
the certificate has been ao published, the corporation is dissftlved, 
and the board shall proceed to settle up and adjust its busbiess 
and affairs. Whenever all the stockholders consent in writing to 
a dissolution, no meeting or notice thereof is necessary, but on 
filing the consent in the office of the secretary of state he shall 
forthwith issue a certificate of diasolution, which shall be pub- 
lished as above provided, and recorded in the office of the clerk 
of the superior court of the county in which the principal office of 
the corporation is located. 
C. S., B. 1182; Eev., b. 11B5; 1901, c. 3, b. 34. 

COTporatlonfl |604. Bankruptcy of a corporation does not, of itself, work 

ft diBSolution.— Stagg v. Spray Water & Land Co., 171 N. C. 583, 89 8. E. 
47. See this ease for general discnstiou of dissolution of corporations. 

OoiporatioiiB g 620. Where the directors of a corporation are proceed- 
ing to dissolve the corporation, under this section, providing that a. corptt 
ration may be dissolved by it3 directors whenever they shall deem it ad. 
viaabie and (or the benefit of the corporation, by passing a resolution by a 
majority of the board, followed by notice to the stockholders end approv- 
al of the resolution by two-thirds of such stockholders in interest, the 
courts will not restrain such proceeding at the instance of a stockholder, 
where it does not appear that the directors are acting in bad faith, or are 
violating their duties as trustees in respect to the corporate management, 
though the corporation is not insolvent, and the sole ground urged b3' il^ 
directors for the dissolution is that it is inexpedient to continue the cor- 
porate business.— White v. Kincaid, 149 N. C. 415, 63 S. E. 109. 

Oorporations §606. Upon the dissolution or extinction of a corporntion 
for any cause, real property conveyed to it in fee does not revert to the 
original grantors or their heirs, and its personal property does not escheat 
to the state; and this is so whether or not the duration of the corporation 
was limited by its charter or general statute. — Wilson v. Leary, 120 N, C. 
90, 26 8. E. 630, overruling Eoi v. Horah, 36 N. C. 358. 

Corporations § 629. Neither officers nor members of corporations can 
evade their plain duty to those with whom contracts are made, by dis- 
solving the organization and leaving creditors unprovided for. — Perry v. * 
Farmers' Mutual Fire Ina. Co., 139 N. C. 374, 51 S. E. 1025, 

OorporatioliB g 629. Where nothing shows a corporation has been dis- 
solved, or its corporate affairs settled in any way recognized by law, stock- 
holders continue to be liable for its debts, and could only be entitled, by 
virtue of their stock, to share in the surplus after all creditors had been 
paid. — Heggie v. People's Building & Loan Ass'n, 107 N. C. 581, 12 S. E. 
275. 



DidilzedbyCoO^IC 



NOKTH Carolina Corpobation Code 87 

115. Liabili^ of Stookbolders. The stockholders of a corpora- 
tioQ chartered under the laws of this state are individuallf liable 
for all taxes, costs and fees for the dissolution of the corporation, 
and the attorney-general is authorized to enforce the provisions 
of this section by suit before a justice of the peace or in the supe- 
nor court in the county where such corporation had its principal 
place of bnsiness, whenever it appears upon report from the sec- 
retary of state that the corporation has ceased to transact business 
and fails to pay the taxes due the state or to file annual statementa 
or to dissolve itself as provided by law. It a nonresident stock- 
holder of the corporation Tefuses to sign the certificate of disso- 
lution, the resident stockholders shall make affidavit to that effect, 
and the written assent of such resident stockholders, accompanied 
by such affidavit, is sufficient to dissolve the corporation. If no 
stockholder of such corporation is found within the state the sec- 
retary of state has authority to declare the charter of the corpora- 
tion forfeited, and shall publish annually in his corporation report 
a list of the corporations whose charters have been so forfeited. 

C. S., B. 1183; 1909, c. 730, s. 1. 

116. Voluntary, before payment of stock. The incorporators 
named in a certificate of incorporation, before the payment of 
any part of the capital stock, and before beginning the' business 
for ■which the corporation was created, may surrender all their 
corporate rights and franchises, by filing in the office of the secre- 
tary of state a certificate, verified by oath, that no part of the 
capital stock has been paid and such business has not been begun, 
and surrendering all rights and franchises. Thereupon the cor- 
poration is dissolved, 

C. S., B. 1184; Bev., 8. 1177; 1901, c. 2, s. 35. 

117. Involnntaiy, at instance of private persons. Corporations 
may be dissolved by civil action, instituted by the corporation, a 
stockholder, or creditor, or by authofity of the attorney-general 
in the name of the state, in the following cases: 

1. For any abuse of its powers to the injury of the public or of 
its stockholders, creditors, or debtors. 

2. For nonuser of its powers for two or more consecutive years. 

3. When it is insolvent, or suspends its ordinary business for 
want of funds, or is in imminent danger of insolvency, or has for- 
feited its corporate rights, 

DidilzedbyCoO^^k ■ 



88 North CARWiiNA Coepoeation Code 

4, Upon any conviction of the company of a persistent criminal 
offense. 
C. S., e. 11S5; Sev., a. 1196; Code, i. 694; 1901, c. Z, b. 73. 

Ootporatbms %6U. The court haviog juriadiction to dissolve corpora- 
tione, may dispose of all qnestions arising.— Las ley v. Walnut Cove Mercau- 
tHe Co., 179 N. C. 575, 103 8. E. 213. 

OorpoiatMns § 611. Sale of property of corporation by commissioner 

upon dissolution properly stayed until creditor and truetee under deed ot 
trust could be made parties. — Ibid. 

Ooryor&tlons §614. In stockholder's action for dissolution of corporation 
and appointment of a receiver, the court will respect all valid and existing 
liens on property of corporation, but will take charge of the property u.f- 
fected by such liens, whether by deeds of trust or other liens, and sell the 
property through ita own appointees in disregard of the minot requirementa 
of the deeds or other instruments, etc., where such course works no sub- 
stantial impairment of the value of the security and is for the best interest 
of the owners and others having claim upon the assets. — Lasley v. Scales, ' 
170 N. C. 578, 103 S. E. 214. 

Corporations |604. Bankruptcy of a corporation does not, of itself, worjt 
a dissolution. — Stagg v. Spray Wator Power & Land Co., 171 N. C. 583, 89 
S. E. 47. 

Oorporattons §553. Where a corporation had done no business for abo)it 
25 years, and there were no ofRcers in existence, and no organization was 
maintained, a atockholder was entitled to maintain an action for the ap- 
pointment of a receiver, although such corporation had not been dissolved 
in accordance with the provisions of statute. — Qreenleaf v. Land & Lumber 
Company, 146 N. C. 505, 60 8. E. 424. 

Corporations §.597. A domestic corporation's failure to maintain a 
"principal office" in the state and the withdrawal of all agencies from the 
state, is an abuse and misuse of its corporate franchise. — Simmons v. Nor- 
folk & B. Steamboat Co., 113 N. C. 147, 18 S. E. 117. 

See Aahevilie Division, Sons of Temperance v. Aston, 92 N. C. 579. 

CorpoTfttlona § 63. A suit by niinofity stockholders to dissolve a cor- 
poration and appoint a receiver does not entitle creditors to relief in the 
banhruptcy court until the corporation became insolvent and committed an 
act of banltruptcy.— Bank of Andrews v. Gudger, 213 Federal 49, 128 C. C. 
A. 505. 

118. Involuntary, by stockholders. When stockholders owning^ 
one-fifth or more in amount 'of the paid-up stock of any corpora- 
tin organized under the laws of and doing business in this state. 
except corporations organized for religious, charitable, fraternal, 
and educational purposes, and except banking and public-service 
corporations, apply in term or vacation to the judge of the supe- 
rior court holding the courts for the county in which the principal 
place of business of the corporation is situated, by petition contain- 
ing a statement that for three years next preceding the filing of 
the petition, which time shall begin to run from three years after 
it has begun business, the net earnings of the corporation have 



,,t.OOgl( 



North Caeouna Corpoeation Cwe 89 

not been sufficient to pay in good faith an annual dividend of four 
per cent upon the paid stock of tli« corporation, over and above 
the salaries and expenses authorized by its by-laws and regulations, 
or that the corporation has paid no dividend for six years preced- 
ing said application ; or whenever atockholders owning one-tenth 
or more in amount of the paid-up common stock of any such cor- 
poration apply to the judge of the superior court as aforesaid by 
petition containing a statement that the corporation has paid no 
dividend on the common stock for ten years preceding said appli- 
cation, and that they desire a dissolution of the corporation, the 
judge shall make an order requiring the officers of the corporation 
to file in court, within a reasonable time, inventories showing all 
the real and personal estate of the corporation, a true account of 
its capital stock, the names of the stockholders, their residences, 
the number of shares belonging to each, the amount paid in upon 
said shares and the amount still due thereon, and a statement of 
all the encumbrances on the property of the corporation and all its 
contracts which have not been fully satisfied and canceled, speci- 
fying the place and residence of each creditor, the sum owing to 
each, the nature of the debt or demand, and the consideration 
therefor, and the books and papers of the corporation. Upon the 
filing of the inventories, account and statements, the court nhall 
enter an order requiring all persons interested in the corporation 
to appear before a referee to be appointed by the court, at a time 
and place named in the order, service of which may be made by 
publication for such time as may be deemed proper by the court, 
and show cause why the corporation should not be dissolved. If 
it appears to the court that the statements contained in the peti- 
tion are true, the court may adjudge a dissolution of the corpora- 
tion and shall appoint one or more receivers, who shall have all 
powers of receivers conferred by this chapter for the winding up 
of the affairs and distribution of the assets of the corporation. If 
it appears to the court that the corporation is insolvent or in im- 
minent danger of insolvency, the court may appoint a temporary 
receiver of the corporation pending dissolution. No suit shall be 
brought for the dissolution of a corporation under the provisions 
of this section until each and all of the petitioners have owned 
their stock for the term of two years prior to the institution of 
the action ; nor shall any such suit be brought for the period of 
three years after a final judgment upon a prior petition as herein 
provided. 

C. S., a. 1186; 1913, c 147; 1915, e. 137, a. 1. 

OoTporatlons g 592. A director, officer and stockholdeT of a corporation, 

DiyilzcdbvCoO^IC 



90 NOETH CaKOLINA CORPORATION CODB 

who h&B for a long time acquiesced in its policy at devoting earnings to 
enlarging the business, instead of payment of dividends, is estopped to asli 
the corporation's dissolution because it has not declared a dividend within 
six jears preceding, as provided by section, — Winstead v. Henrne Bros. & 
Co., 173 N. C. 606, 92 S, K 613. (Attention is called to the inconsistency of 
the period that must run without dividends, six years, as stated by Laws 
of 1913, c. 147, and the period of ten years contained in the amendment 
of Chapter 137, Laws of 1915. It is held that a ten year complete suspen- 
sion of dividends on the common stock is grounds for appointment of re- 
ceiver. )— Ibid. 

Corporation g 572. The court has power to enter a decree for a sale of 
the franchise with the corporate property, transferring the same to the 
purchasers and conferring upon them the right to reorganize and carry 
on the business as a new corporation. — Wood v, Staton, 174 N. C. 245, 93 
8. E. 7B4. 

119. Involuntary, hy attom^-general. .Aji action may be 
brought by the attorney-general in the name of the state against 
a corporation for the purpose of annulling its charter upon the 
ground that it was procured upon a fraudulent suggeation, or con- 
cealment of a material fact, by the persons incorporated or by 
some of them, or with their knowledge or consent ; or for the pur- 
pose of annulling the existence of a corporation, other than mu- 
nicipal, when such corporation — 

1. Offends against the act creating, altering, or renewing it. 

2. Violates any law by which it has forfeited its charter by 
abuse of its power. 

3. Has forfeited its privileges or franchises by failure to exer- 
cise its power. 

4. Has done or omitted any act which amounts to a surrender 
of its corporate rights, privileges and franchises. 

5. Has exercised a franchise or privilege not conferred upon it 
by law. 

6. Has failed to use its powers for two or more consecutive 
years. 

7. Has become insolvent as manifested by the return of an ex- 
ecution unsatisfied upon a judgment against the corporation 
docketed in the superior court of the county where it has its prin- 
cipal place of business. 

It is the duty of the attorney-general, whenever he has reason 
to believe that any of these acts or omissions can be established 
by proof, to bring an action in every case of public interest, and 
also in every other case in which satisfactory security, is given to 

DidilizedbyCotl^^IC 



NOBTH Carolina Corporation Code 91 

indemnify tlie state against the costs and expenses to be incurred 
thereby. 
C. 8., ». 1187; Eev., b. H»8; Code, as. 604, 605; 1886, c. 533. 

HimlslpAl OorpoiftUona § 18. Under the authority of the at tome j -gen- 
eral to sue to annul the cbarter of a corporation on the ground it waa 
proenred on a fraudulent BUggeation or concealment of a material fact, he 
may sue to annul the charter of a rural community obtained on the false 
BUggeation that it eonaisted of one entire sr.hool district, when in fact it wna 
composed of parts of three. — Uanning v. Bama Bnral Community, 109 S. 
E. 576. 

Oorpoiatlons |6{>9. The attorney- gen era! is prohibited from bringing an 
action on hia own motion for the vacation of a. corporation's articles, etc., 
for fraud.— Attorney General v. Holly Shelter B. Co., 134 N. C. 481, 46 S. E. 
959. 

OorporaUotU §599. A corporation cannot endure longer than the time 
preaeribed in its charter, and no judicial proceedings are neceaaary to de- 
clare a forfeiture for such a cause, but for any other cauae of forfeiture 
a direct proceeding must be iaatituted by the sovereign to enforce the for- 
feiture, and it canoot be taken advantage of in any collateral proceedings. — 
Asheville Diviaion, Sona of Temperance, v. Aatou, 92 N. C. 579. 

OorporatiOIU §387. If a New York mining corporation, doing business 
in North Carolina, had violated its articles of incorporation, the matter 
could not be set up by defendants in the company 'a action in North Caro- 
lina to recover land, but it would be neceaaary that quo warranto be inati- 
tnted by leave of the Attorney Oeneral.— Troy & North Carolina Mining Go. 
V. Snow Lumber Co., 173 N. C. 593, 93 8. £. 494. 

;. 117; Attor- 

120. Forfettnre <n- dlBSolutlon for failure to organize or act. 
When a charter has been granted creating a corporation, and the 
incorporators for two years neglect to organize and carry into 
effect the intent of the charter, or when organized, if they for two 
consecutive years cease to act, then this disuse of their cor- 
porate privileges and powers is a forfeiture of the charter. If, 
after thirty days notice by the secretary of state, the corporation 
fails to surrender its corporate rights or to dissolve, in the man- 
ner provided in this chapter, the secretary of state shall report 
it to the attorney- general, who shall institute an appropriate ac- 
tion for its dissolution. 

C. 8., a. 1188; Bev., s. 1246; Code, s. 688; 1901, c. 2, a. 106. 
Oorpoifttlons |696. Failure of corporation to organize within two years 
after it is chartered cannot be aet up againat the validity of a lien, by « 
bank on sharea of a stockholder given by the charter, but can only be raised 
by the state in a direct proceeding.— Boyd v. Redd, 120 N. C. 335, 27 S. il. 
3&. 

121. Forfeiture for nonuser by hydro-electric companies. All 

waterpower, hydro-electric power, and water companies ^fApflT^ 



92 North Carolina Corporation Code 

poratioDB organized in this state shall be required to begin active 
work in making their proposed development within two years 
after their organization and diligently to prosecute their work on 
the aame until it has been completed ; and a faihire to begin the 
work or development within the time, and to diligently prosecute 
work on the same until its completion, as herein provided, shall be 
legal grounds for declaring their charter rights, privileges and 
franchises forfeited, by the state, acting through its attorney-gen- 
eral, upon the recommendation of the corporation commissioD of 
this state ; Provided, this section shall not apply to any company 
which is supplying the public and is meeting the demands of the 
public for its services. 

C. S., s. 1189; 1913, c. 133, a. 2. 

122. Involuntary, by bankruptcy. When a corporation char- 
tered under the taws of this state is adjudged bankrupt under the 
laws of the United States, the charter of the corporation is for- 
feited without further action, unless the stockholders determine by 
appropriate resolutions to continue the corporate existence of the 
corporation after the adjudication in bankruptcy, and furnish the 
secretary of state with a duly certified copy of the resolutions, 
all within six months after the adjudication. The stockholders of 
a bankrupt corporation whose existence is continued by the fore- 
going procedure must pay all privilege taxes which have accrued 
against the corporation '^ince the adjudication, together with a 
fee of one dollar allowed the secretary of state for recording and 
filing the certificate provided for in this section. 

C, S., a. 119Q; 1915, c, 134, as. 2, 3. 

Corporations §604. Bankruptcy of a corporation docs not of itself work 
a ilisaolution.— Stagg v. Sprav Water Power ft Land Compaiiv, 171 X. C. 
583, 89 S. E. 47. 

123. When franchises forfeited by neglect, etc., corporation dis- 
solved; costs. If it is adjudged that a corporation against which 
an action has been brought has forfeited by neglect, abuse, or sur- ■ 
render, its corporate rights, privileges and franchises, judgment 
shall be rendered that the corporation be excluded from such 
rights, privileges and franchises, and that it be dissolved. If 
judgment is rendered in such action against a corporation, or 
against persons claiming to be a corporation, the court may cause 
the costs to be collected by execution against the persons making 
the claim, or by attachment or process against the directors or 
other officers of the corporation. 

C. S., B. 1191; Rev., bs. 1209, 1210; Code, bs. 617, 818. ( \>t>Qlc 



North Carolina Corporation Code 93 

134. Service of stinunoiis in action for dissolation. In an action 
for the dissolation of a corporation, or for the appointment of a 
receiver thereof, the summons must be served on the corporation 
by service on an officer or agent upon whom other process can be 
served, and shall be served on the stockholders, creditors, dealers, 
and others interested in the affairs of the company by publiijhiQg a 
copy at least weekly for two successive weeks in some newspaper 
printed in the county in which the corporation has its principal 
place of business, or if there is no such newspaper published, by 
posting a copy of the summons at the door of the courthouse of 
such county, and publishing a copy for the time and in the man- 
ner aforesaid in a newspaper published nearest the county seat of 
the county in which the corporation has its principal place of 
business or in a newspaper published in the city of Raleigh. This 
publication is sufficient service on all the stockholders, creditors 
of, or dealers with, the corporation, and upon the corporation, if 
no officer can after due diligence be found in the state and it has no 
process agent in the state; and all such stockholders, creditors or 
dealers or other parties interested may intervene in said proceed- 
ings and become parties thereto for themselves, or for others in 
like interest, under such rules as the court for the purpose of 
justice prescribes. 

C. S., B. 1192; Bev., a. 1199; Coile, a. 695; 1911, c. 173, b. 1. 

126.' Corporate existence continued three years. All corpora- 
tions whose charters expire by their own limitation, or are an- 
nuled by forfeiture or otherwise, shall continue to be bodies cor- 
porate for three years after the time when they would have been 
so dissolved, for the purpose of prosecuting and defending actions 
by or against them, and of enabling them gradually to settle and 
close their concerns, to dispose of their property, and to divide 
their assets; but not for the purpose of continuing the business 
for which the corporation was established. In any pending action 
the court, in its discretion, may extend the time for winding up 
the affairs of such corporation. 

C. a, s. 1193; Kev., a. 1200; Code, b. 667; 1001, c. 2, s. 58. 

Corporations §630. The Btafutory remedy is exclusive of all othcra, and 
must be pursued within throe years. A failure to proceed within that period 
will be a complete defense, not only to the corporation, but to the atock- 
bolders who by its charter are made individually responaible in the event of 
its inaolvoncy. — Von Olnhn v. Do Rosaet, 81 N, V. 467. 

OoiporatioDB § 630. Judgmenta against a corporation rendered upon pros- 
ess iaaued after it ceased to exist, are of no validity .^Dobson v. Simonton, 
86 N. C. 492. 



■ CorporftUons g 577. Section above does not apply where n 



°'?iTf5§fc- 



94 North Cabouna Coeporation Code 

tion ia, by a, transfer of all its property rights and privileges, merged into ft 
new company, with the same Btockholdera and director! as the old, which aa- 
aume all liabilities and contracts of the old corporation. — Friedenwald & 
Co. V. Asheville Tobacco Worka and Cigarette Co., 117 N. C. 544, 23 S. E. 
490. 

. Peoples Building & Loan Aas'n, 107 N. C. 

OorporftUom g 619. A valid conveyance of property belonging to a cor- 
poration can be made in the corporation's name by the order of its trna- 
tees after its voluntary dissolntion, — Ijowdermili v, Bntler, 182 N. 0. 502, 
109 S. E. 571. 

126. Directors to be trustees; powers and duties. On the disso- 
lution in any manner of a corporation, unless otherwise directed 
by an order of the court, the directors are trustees thereof, with 
full power to settle the affairs, collect the outstanding debts, sell 
and convey the property, and, after paying its debts, divide any 
surplus money and other property among the stockholders. The 
trustees have power to meet and act under the by-laws of the cor- 
poration, and, under regulations to be made by a majority, to 
prescribe the terms and conditions of t6e sale of such property, 
and they may sell all or any part for cash, or partly on credit, 
or take mortgages or bonds for part of the purchase price for 
all or any part of the property. They have power to sue for and 
recover the said debts and property in the name of the corporation, 
and are suable in the same name for the debts owing by it, and 
are jointly and severally responsible for such debts only to the 
amount of property of the corporations which comes into their 
possession as trustees. 

C. 8., 8. 1194; Eev., at. 1201, 1202; Code, b. 687; 1901, c. 2, bb. 59, 60. 

Ooipontlons |5S0. It ib the duty of the directorB to preserve the assets 
of the corporation and adminiater them for the benefit of the creditors. — 
Mciver v. Young Hardware Co., 144 N. C. 478, 57 S. E. 169. 

OorpoiatlonB g 542. All the directors and stockholderB of a corporation 
may not aell practically the entire assets of the corporation for their own 
beneSt and advantage, upon a consideration moving to themselves alone, 
to tho prejudice of the rights of its creditors. — Ibid. 

Oorporatlons g 619. A valid conveyance of property belonging to a cor- 
poration can be made in the corporation's name by the order of its trustees 
after its voluntary dissolution.— Lowdermilk v. Butler, 182 N. C. 602, 109 
8. E. 571. 

127. Jurisdiction of superior court. When a corporation is dis- 
solved, in any manner whatsoever, the superior court, on applica- 
tion of a creditor or stockholder, may either continue the direc- 
tors as trustees or appoint one or more persons receivers of the 
corporation. The court has jurisdiction of the application, and of 
all questions arising in the proceedings thereon, and may make, 

DiclzedbyCoO^IC 



NoBTH Carolina Corporation Code 95 

at any place id the district, any orders, injunctions, or decrees 
therein bs justice and equity require. The powers of .such trustees 
or receivers are as elsewhere given in this chapter, and may be 
continued as long as the court thinks necessary. 

C. 8., s. 1195; Bev., bs. 1203, 1204; Code, as. 619, 66S, 669; 1901, •:. i, sa. 
ftl, 6S. 

OorponttlonB g6Z6. Proceedings to recover the asBetg and capital stock 
of a diaaolved corporation which had been distributed among the stocbhold- 
ere, and against the officers and directors, were within the equitable juris- 
diction of the superior court; the statute declaring the liability of directors 
and stockholders to creditors being simply a cumulative legal remedy, and 
not restricting the rights of the creditors by shortening the time within 
which -those rights could be enforced. — Chatham v. Mecklenburg Realty Co., 
180 N. C. 500, 105 8. E. 339. 

OorpoTatloiu g 626. The entire matter of winding np the business of a 
corporation after dissolution may be taken charge of by the court, and 
most be at the instance of either the creditors or stockholders, or any one 
of them.— White v. Kincaid, 149 N. C. 415, 03 8. E. 109. 

Oorporatloiu § 663. An insolvent corporation, with its property or plant 
located in this state, is subject to the appointment by our court of a re- 
ceiver to take charge of its assets here and administer them as a trust fund 
for its creditors, though incorporated under the laws of another state. — 
Summit 8ilk Co. v. Kinston 8pinning Co.^ 154 N. C. 422, TO 8. £. S20; Hols- 
houser v. Gold Hill Copper Co., 138 N. C. 251, SO 8. E. 850. 

Oorporationa g663. If, during the existence of a corporation, its officers 
fraudulently or unlawfully disposed at any of its property, creditors are 
entitled to have a receiver appointed to sne for and recover it. — Latta v. 
Catawba Electric 4 Power Co., 146 N. C. 285, 59 S. B. 1028. 

COTpontlona g663. In stockholder's suit to justify the appointment of 
» receiver, where plaiutiffs proved majority stockholders' mismanagement 
would bring about insolvency, it was not necessary that they show abso- 
lute insolvency of corporation. — Mitchell v. Aulander Realty Co., 169 N. C. 
616, 86 8. E. 353. 

Oorporatloiu §661. The receiver of an insolvent corjioration may, either 
in his own name or in that of the corporation, sue to collect the assets of 
the corporation, and have adjudicated in such suit all legal and equitable 
matters touching the rights of the corporntion, its creditors and debtors. — 
Smatbers v. Western Carolina Bank, 1S5 N. C. 410, 47 S. E. 893. 

Ootporatlons 8661. The receiver may sue either iu his own name or in 
that of the corporation. In whatever name he may elect to bring the action, 
it is essentially a suit by the corporation, prosecuted by order of the court, 
for the collection of assets. Whatever may have been the law in respect 
to the right of the receiver to prosecute actions for the recovery of the 
aasets of the corporation prior to the change in our judicial system, blend- 
ing legal and equitable jurisdiction and remedies and power into one tri- 
bunal and providing for one form of action, it is well settled that a receiver 
can now sue either way. A receiver is only the officer of the court, its 
custodian, and the title to the assets remains in the original owner. He is 
the arm of the court to collect and administer the assets, and acquires no 
beneficial interest in them. It is clear he may use the name of the insol- 
vent corporation, or his own, or both, at his election.— Clark Millinery Co. 
V. National Union Fire Ins. Co., 160 N. C. 130, 75 8. E. 944. ^ ~ r 



96 NoETH Carolina Corporation Code 

128. Injunction; notice and undertaking. An injunction to sus- 
pend the general and ordinary business of a corporation or to 
appoint a receiver shall not be granted witiiout due notice of the 
application therefor to the corporation, except where the state is 
a party to the proceedings, unless the plaintiff gives a written 
undertaking, executed by two sufficient sureties to be approved by 
the judge, to the effect that the plaintiff will pay all dam- 
ages, not exceeding the sum mentioned in the undertaking, which 
the corporation may sustain by reason of the injunction, or the 
appointment of the receiver, if the court finally decides that the 
plaintiff was not entitled thereto. The damages may be ascer- 
tained by a reference or otherwise, as the court directs. 

C. S., a. 1196; Bev., s. 1205; Code, s. .14S; C. C. P., b. 194. 

Corporations JMfl. Where there is a eause (or complaint by atorliliolil- 
era ftKainat otliora, tliey should first resort to the remedy prescribed in their 
charter; and failiog in this, they will have a right to proceed against tbs 
delinquents, and, in proper roses, injunction will be granted to protect the 
rights of parties.— Mooro v. Silver Vnlley Mining Co., 104 N. C. 534, 10 S. E. 
679. And facts sufficient to sustain cause of action must be alleged before 
injuuetion will lie. — Ibid. 

Uljimctlon 1 12. Where the directors of a corporation, having power to 
Bell, have consummated a sale of corporate stock, it is too late for inter- 
ference by injunction; a stockholder desiring to enjoin the transfer pend- 
ing litigation having a remedy by motion in the cause for good cause 
shown. — Iluet v. Piedmont Springs Lumber Co., 138 N. C. 443, 50 S. E. 84C. 

129. Wages for two months lien on assets. In case of the in- 
solvency of a corporation all persons doing labor or service of 
whatever character in its regular employment have a lien upon the 
assets thereof for the amount of wages due to them for all labor, 
work, and services rendered within two months next preceding 
the date when proceedings in insolvency were actually instituted 
and begun against the corporation, which lien is prior to all other 
liens that can bo acquired against such assets. 

C. S., a. 1197; Rev.' a. 1200; 1901, c. 2, s. 87. 

Corporations §480. One n-bo takes a mortgage upon corporation property 
for money loaned does so with the knowledge that his lien may be displaced 
in favor of laborers' liens or judgments for tort and the expenses of rcceiV' 
ership or of other court proceedings to wind up the corporation in cases 
of insolvenc v.— Humphrey Bros. v. Buell-Crocker Lumber Co., 171 N. C. 
514, 93 S. E. 971. 

Insolvency §119. Section does not destroy the lien of a laborer for serv- 
ices performed after the institution of insolvency proceedings, but merely 
limits the lien to all labor performed after 60 days before the institution 
of the proceedings.— Walker v. Linden Lumber Co., 170 N. C. 460, 87 S. fe. 
331. 

Corporations g 566. Statute does not apply to independent contractors 
whose profits or losses are regulated under their contract. — Phoenix Iron 
Co. v. Roanoke Bridge Co., 169 N. C, 512, 86 S. E, 184. 

DiyilzcdbvCoO^IC 



NOBTH Cabouna Corporation Code 97 

&uotTinc7 g 119. Statute doea not erettte a preference in favor of the 
employee! of an inaolvent eorporation in timber, title to which was held 
aa Beenrity by one not in privity with the corporation. — Roberta v. Bowen 

Uanaafeturiner Co., 169 N. C. 27, S5 S. E. 4S. 

OoipoTatjAiu 1 6S6. — Offieera and owners of a corporation are not entitled 
to priorities of payment for work and labor done b7 them over the other 
ereditorg, as sneh offleera do not come under the meaning of the word 
"laborers" and "workmen" need in the statute, and were not so in- 
tended.— Alexander V. Farrow, 151 N. C. 320, 66 8. E. 209. 

See Biley «. Sean ft Co., 166 N. C. 267, 72 S. E. 367. 

130. Distribution of fnndB. After payment of all allowances, 
expenses and costs, and the satisfaction of all general and special 
liens upon the funds of the corporation to the extent of their law- 
ful priority, the creditors shall be paid proportionately to the 
amount of their respective debts, and ahall be entitled to distribu- 
tion OQ debts not due, mabing in such case a rebate of interest 
vhea interest is not accruing on the same. Any surplus funds, 
after payment of the creditors and costs, expenses and allow- 
ances, shall be paid to the preferred stockholders according to 
their respective shares, and if there still be a surplus, it shall be 
divided and paid to the general stockholders proportionately, 
according to their respective shares. Upon the distribution of the 
assets of an insolvent corporation, judgment of dissolution shall be 
entered and a certified copy of the judgment filed in the office of 
the secretary of state, and also in the office of the clerk of the 
superior court of the county in which the principal office of the 
corporation is located, and the same shall be recorded in the Cor- 
poration Book and in the Record of Incorporations in these ofBces 
respectively. Thereupon the corporation Is dissolved without being 
required to comply with section 1182 (herein 114) under this 
chapter. 

C a, B. 1198; Bev., s. 1207; Code, s. 670; 1901, c. 2, ss. 63, S9; 1909, 
c IS, s. 1. 

Corporations | 56S. After the payment of costs and the satisfaction of 
special and general liens, the creditors of an insolvent corporation shall be 
paid proportionately to the amount of their respective debts, and the court 
■hall allow casts before distribution of the assets among the creditors, costs 
and legitimate expenses in a suit to distribute the aBseta of an insolvent 
corporation must be paid out of the funds of the corporation, and the bal- 
ance must be distributed among the creditors according to priority. — Hick- 
son lumber Co. v. Gay Lumber Co,, 150 N. C. 281, 63 8. E. 1048. 

Section referred to.— The Observer Co. v. LittlB, 175 N. C. 42, 94 8. E. 
52(1; Humphrey Bros. v. Buell-Crocker Lumber Co., 174 N. C. 514, 93 8. E. 
971; Chatham v. Mecklenburg Realty Co., 180 N. C. 500, 105 8. E. 329. 

131. Debts not eztingoished nor actions abated. In case of the 
dissolution of a corporation, the debts due to and from it are not 



sdbyCoO^Ic 



98 North Carolina Corporation Cote 

thereby extinguished, nor do actions against a corporation which 

is dissolved before final judgment abate by reason thereof, but no 
judgment shall be entered therein without .notice to th« trusteea 
or receivers of the corporation. 

C. S., i. 11B9; Bev., sa. 1201, 120B; Code, s. 687; l&Ol, c. 2, as. 59, 64. 

132. Oop7 of judgment to be filed with secretary of state; 
costs. A copy of every judgment dissolving a coi^joration or 

forfeiting its charter shall be forthwith- filed by the ckrk of the 
court in the office of the secretary of state, and a note thereof 
shall be made by the secretary of state on the charter or certifi- 
cate of incorporation and in the index thereof, and be published 
by him in the annual report hereinafter provided for, the cost 
of which shall be taxed by the clerk of the superior court in 
the action wherein the corporation is dissolved. 
C. S., a. 1300; Bev., a. 1211; 1901, c. 2, b. 65. 

ABT. 9. EXECUTION. 

133. How issued; property subject to execution. If a judg- 
ment is rendered against a corporation, the plaintiff may sue out 
such executions against its property as is provided by law to be 
issued against the property of natural persons, which executions 
may be levied as well on the current money as on the goods, 
chattels, lands and tenements of such corporation. 

C. S., a, 1201; Rev., s. 1212; 1901, c. 2, a. 66. 

134. A^nt mast furnish infomuition as to property to ofiS- 
cer. Every agent or person having charge or control of any 

property of the corporation, on request of a public officer hav- 
ing for service a writ of execution against it, shall furnish to 
him the names of the directors and officers thereof, and a sched- 
ule of all its property, including debts due or to become due, so 
far as he has knowledge of the same. 
C, S., a. 1202; Bev., a. 1213; 1901, c. 2, a. 67. 

135. Shares of stock subject to; agent must furnish infonmi' 
tion. Any share or interest in any bank, insurance company, or 
other joint stock company, that is or may be incorporated under 
the authority of this state, or incorporated or established under 
the authority of the United States, belonging to the defendant 
in execution, may be taken and sold by virtue of such ctecu- 
tion in the same manner as goods and chattels. The clerk, caShier, 
or other officer of such company who has at the time the custody of 
the books of the company shall, upon being shown the writ of exe- 



sdbyCoO^Ic 



North Cabolina Corporation Code 99 

cution, give to the officer having it a certificate of the number 
of shares or amount of the interest held by the defendant in the 
company; and if he neglects or refuses to do so, or if he ■will- 
fully gives a false certificate, he shall be liable to the plaintiff 
for the amount due on the execution, with costs. 
C. 8., B. 1Z03( Bev., sb. J214, 1215; IflOl, c. 2, as. 69, 70. 

136. Debts due corporation subject to; duty and liability of 
a^ent. If an officer holding an execution is unable to find other 
property belonging to the corporation liable to execution, he 
or the judgment creditor may elect to satisfy such execution 
in whole or in part out of any debts due thp corporation; and it 
is the duty of any agent or person having custody of any evidence 
of such debt to deliver it to the officer, for the use of the cred- 
itor, and such delivery, with a transfer to the officer in writing, 
for the use of the creditor, and notice to the debtor, shall be a 
valid assignment thereof; and the creditor may sue for and col- 
lect the same in the name of the corporation, subject to such 
equitable set-offs on the part of the debtor as in other assign- 
ments. Every agent or person who neglects or refuses to com- 
ply with the provisions of this and the last preceding section 
is liable to pay to the execution creditor the amount due on the 
execution, with costs. 

C. S., B. 1204; Rev,, 3. 121fi; 1901, e. 2, b. 68. 

137. Violations of three preceding sections misdemeaQor. If 
any agent or person having charge or control of any property of 
a corporation, or any clerk, cashier, or other officer of a corpora- 
tion, who has at the time the custody of the books of the com- 
pany, or if any agent or person having custody of any evidence 
of debt due to a corporation, shall, on request of a public officer 
having in his hands for service an execution against the said 
corporation, willfully refuse to give to such officer the names of 
the directors and officers thereof, and a schedule of all its prop- 
erty, including debts due or to become due, or shall willfully re- 
fuse to give to such officer a certificate of the number of shares, 
or amount of interest held by such corporation in any other cor- 
poration, or shall willfully refuse to deliver to such officer any - 
evidence of indebtedness due or to become due to such corpora- 
tion, he shall be guilty of a misdemeanor. 

C. B., B. 1205; Rev., s. 3600; 3901, r. 2, is 07, 68, 70. 

13S. Proceedings when custodian of corporate books is a non- 
resident. When the clerk, cashier, or other officer of any-corpoi 

.,u-..j..A..O(lglc 



100 North Cabolina CoRPORAinoN Code 

ration incorporated under the laws of this state, who has the 
custody of the stock-registry books, is a nonresident of the state, 
it is the duty of the sherifif receiving a writ of execution issued 
out of any court of this state against the goods and chattels of a 
defendant in execution holding stock in such company to send 
by mail a notice in writing, directed to the nonresident clerk, 
cashier, or other officer at the postoffice nearest his reputed 
place of residence, stating in the notice that he, the sheriff, holds 
the writ of execution, and out of what court, at whose suit, for 
what amount, and against whose goods and chattels the writ 
has been issued, and that by virture of such writ he seizes and 
levies upon all the shares of stock of the company held by the 
defendant in execution on the day of the date of such written 
notice. It is also the duty of the sheriff on the day of mailing 
the notice to affix and set up upon any office or place of busi- 
ness of such company, within his county, a like notice in writing, 
and on the same day to serve like notice in writing upon the 
president and directors of the company, or upon such of them as 
reside in his county, either personally or by leaving the same at 
their respective places of abode. The sending, setting up, and 
serving of such notices in the manner aforesaid constitutes a 
valid levy of the writ upon all shares of stock in such company 
held by the defendant in execution, which have not at the time 
of the receipt of the notice by the clerk, cashier, or other officer, 
who has custody of the stoek-registry books, been actually trans- 
ferred by the defendant; and thereafter any transfer or sale of 
such shares by the defendant in execution is void as against the 
plaintiff in the execution, or any purchaser of such stock at any 
sale thereunder. 

C. S., B. 1206; Bev., s. 1217; 1901, c. 3, s. 71. 

139. Duty and liability of nonresident custodian. The non- 
resident clerk, cashier, or other officer in such corporation, to 
whom notice in writing is sent as prescribed in the preceding 
section, shall send forth^frith to the officer having the writ, a 
statement of the time when he received the notice and a certifi- 
cate of the number of shares held by the defendant in the corpo- 
ration at the time of the receipt, not actually transferred on the 
books of the corporation ; and the sheriff, or other officer, on re- 
ceipt by him of this certificate, shall insert the number of shares 
in the inventory attached to the writ. If the clerk, cashier, or 
other officer in such corporation neglects to send the certificate 
as aforesaid or willfully sends a false one, he is liable to the 



NOETH CABOLINA COEPOEATION COD^! 101 

plaiotifE for double the amount of damages occasioned by his 
neglect, or false certificate, to be recovered in an action against 
him.; but the neglect to send, or miscarriage of the certificate, 
does not impair the validity of ttie levy upon the stock. 

C. 8., a. 1207; Bev., b. IBIS; 1901, e. 2, b. 72. 

AUT. 10. RECEIVERS. 

140. Appointment and removal When a corporation becomes 
insolvent or suspends its ordinary business for want of funds, or 
is in imminent danger of insolvency, or has forfeited its corporate 
rights, or its corporate existence has expired by limitation, a re- 
ceiver loay be appointed by the court under the same regulations 
that are provided by law for the appointment of receivers in 
other cases; and the court may remove a receiver or trustee and 
appoint another in his place, or fill any vacancy. Everything 
required to be done by receivers or trustees is valid if performed 
by a majority of them. 

C. 8., a. 1208; Bev., as. 121B, 1223; Code, a. 868; 1901, c. 2, sb. 73, 79. 

Oorpontlotu g 653. Where it appeared that a. corporation was insolvent 
and was indebted to various creditors, and had no fnada to conduct its buai- 
nesa, and it liad certain macbinerj alleged to belong to one of its creditora, 
and which waa in danger of being logt, a receiver was properly appointed. — 
Summit 8Uk Co. v. Kinstoa Spinning Co., 154 N. C. 421, 70 8. E. 830. 

OorporatlolU g 569. Where a receiver of a corporation is appointed after 
the commencement of an action against it, the plaintiff ma; atill proceed 
kgainit the corporation making the receiver a defendant. — Black v. Con- 
solidated By. & Power Co., 1S8 N. C. 468, 74 S. E. 468. 

Oorporatlona gSCS. The selection of receiver in a atoekholder'a aait 
ftgainst corporation lies largely in discretion of the court. — Mitchell v. An- 
Under Realty Co., 169 N. C. 516, 86 S. E. 358. 

Oorpomtiona g6G9. Under law of North Carolina, appointment of a ^re- 
ceiver for corporation does not eo imtanti atop interest upon all of Jts inter- 
est bearing obligations.— Moore v. Watauga & Y. B. Co., 173 N, C. 726, 93 
8. E. 361. 

eorporatlana |553. If, during the existence of a corporation, Ita officers 
fraudulently or unlawfully diapoae of any of ita property, creditors are 
entitled to have a receiver appointed to sue for and recover it. — Latta v. 
Catawba Electric & Power Co., 146 N. C. 385, 59 8. E. 1028. 

Oarporatlons §663. Where a corporation had done no 
25 years, and there were no olBcera in existence, and n 
maintained, a atockbolder was entitled to maintain an action for 
appointment of a receiver, although auch corporation had not been dis- 
solved in accordance with the provisions of the statute. — Greenleaf v. Land 
ft Lumber Co., 146 N. C. 505, 60 S. E. 434. 



Oorporatlons g651. A solvent corporation cannot be placed in i 
ship to enable a stockholder, who had deposited his stock as collateral tot 
a debt, to have an account of its assets. — Huet v. Piedmont Sptingr 
Lumber Co., 138 N. C. 443, 60 S. E. 846. 



DidilzedbyCoO^IC 



102 NoETH Carolina Coepoeation Code 

Corporations §'561. The rci-pivfr of Hn iiiaolve 
in. hia owu iiome or iu that of the corporation, a 
tho corporation, and have ndjudtratei] in siifh auit alt legal and equitable 
niattcra touchinj; the rights of tlip torporntioii, its creditors and debtors. — 
Smathers v. Western Carolina Bank, 135 N. C. 410, 47 8. B. 8S3, 

Oorporatlona § 6&9. A deetee in New York declaring the insolvency of 
a corporation of that state, and appointing receivers thereof, does not 
operate to diveat the lien acquired by the lev; of an attachment on the real 
estate of such corporation in North Carolina. — Kruger v. Bank of Com- 
merce, 123 N. C. 16, 31 S. E. 270. 

Ooipontfons gB59. Where a receiver was appointed to take entire con- 
trol of all the assets of a corporation, it was not liable to an officer for 
salary during such receivership, since the performance of the contract be- 
tween the corporation and the officer was rendered impossible by judicial 
action, and not bv the fnult of the corporation. — Lenoir v. Linville Inij'. 
Co., 126 N. C. 923, .!6 R. E. 185. 

Corporations §544. The assets of an inHOlvent corporation constitute a 
trust fund for Ihe pavment of its debts, and their administration is pecu- 
liarly within the jurisdiction of a court of equitv.^In re McKinnon Co., 237 
Federal 869. 

Bankruptcy §20. Pendency in u state court of a suit by stockholders to 
dissolve a corporation, and appointment of a rei'civer more than four 
months before petition in bankruptc}- does not defeat creditors' right to 
have tho estate administered iu the bankruptcy court, where they asserted 
that right as soon as the corporation was known to be insolvent and had 
committed an act of baukruptcv.— Bank of Andrews v. Gudger, 212 Federal 
49, 128 C. C. A. SOo. 

Bankruptcy 1 20. A receiver of a corporation ap[vointed by a state court 
in behalf of stockholders could not hold the corporate property adversely to 
the receiver iu bankruptcy claiming on behalf of the creditors. — Ibid. 

141. Powers and bond. The receiver has power aud authority 
to— 

1. Demaiiil, sue for, collect, receive and take into his possession 
all the goods and chattels, rights and credits, moneys and effects, 
lands and tenements, boohs, papers, choses in action, bills, notes, 
and property of every description of the corporation. 

2. Foreclose mortgages, deeds of trust, and other liens exe- 
cuted to the corporation. 

3. Institute suits for the recovery of any estate, property, dam- 
ages, or demands existing in favor of the corporation, and he 
shall, upon application by him, be substituted as party plaintiflf 
in the place of the corporation in any suit or proceeding pending 
at the time of his appointment. 

4. Sell, convey, and assign all of the said estate, rights, and 
interest. 



5. Appoint agents under him 



sdbyGoOgIc 



North Carouna Cobporation Code 103 

6, Examme persons and papers, and pass on claims as elsewhere 
provided in this article. 

7. Do all other acts which might be done by the corporation, 
if in being, that are necessary for the final settlement of its un- 
Unished business. 

The powers of the receiver may be continued as long as the 
court thinks necessary, and the receiver shall hold and dispose 
of the proceeds of all sales of property under the direction of 
the court, and, before acting, must enter into such bond and com- 
ply with such terms as the court prescribes. 

C. a, 8. 120Si Rev. Bs. 1222, 1231; Code, a. 669; IBOl, c. 2, w. 74, 94. 

■Danry S 129. A receiver of a corporation mnv maintain n plen of iisurv. — 
Biley & Co. v. Bears & Co., 154 N. C. 509, 70 S. E. 997. 

CoipoiAtlons g 661. A receiver of aa iaBolvent corporation ma; sue in 
his own name or in that of the corporation to collect the assets of the 
corporation, and have adjudicated in such suit all legal and equitable 
matters touching the rights of the corporation, its creditors and debtors. — 
Smathers v. Western Carolina Bank, 135 N. C. 410, 47 8. E. 993. 

Bacelvers g 182. Where a resident creditor of an insolvent corporation 
bank brought suit in another state, which prevented or interferred with 
the collection of the assets of the bank by the receiver, the latter was 
entitled to enjoin the prosecution at such suit. — Davis v. Butters Lumber 
Co., 132 N. C. 233, 43 S. E. 650. 

Seceiven gTB. Property in the hands of a receiver, cannot be sold under 
execution without leave of court. — Pelletier v. Greenville Lumber Co., 123 
N. C. 596, 31 8. E. 955. 

Corporations g 661. The receiver of a corporation can sue a debtor either 
in his own name or in name of the corporation. — Gray v. Lewis, 94 N, C, 
392; Davis v. Industrial Mfg. Co., 114 N. C. 321, 19 S. E. 371. 

Corporattona 8 561. Being under the control of. (he court, no one but 
iver can collect the assets of an insolvent corporation. — Dunn v. John- 
115 N. C. 259,20 8 E. 390. 



B g218. The liability of sureties ou a receiver's bond is (iroperly 
enforced by independent action against them. — Black v, Gentery, 119 N. C. 

502, 26 S. E. 4S. 

Becetvers ■ g 218. Where judgment has been recovered against the 
receiver, he is not a necessary party to an action against the sureties on his 
bond.^ — ^Ibid. 

142. Title and inventory. All of the real and personal prop- 
erty of an insolvent corporation, wheresoever situated, and all 
its franchises, rights, privileges and effects, upon the appoint- 
ment of a receiver, forthwith vest in him, and the corporation is 
divested of the title thereto. Within thirty days after hia ap- 
pointment he shall lay before the court a full and complete inven- 
tory of all estate, property, and effects of the corporation,^i|1iS,fl|^ 



104 NOBTH Cabolina Cobpobation Code 

ture and probable value, and an account of all debts due from 
and to it, as nearly as the same can be ascertained, and shall make 
a report of his proceedings to the superior court at every civil 
term during the continuance of the trust. 
G. 8., 8. 1210; Rev., bb. 1224, 1225; 1901, c. 2, m. T9, SO. 

Oorporktlona g 661. Upon the iDB0lveDC7 of a corporation and the ap' 
pointment of a receiver, the corporate propertj vesta in the receiver from 
his appointment, and. the receiver represents the creditors as well as the 
owner, excluding the ^nerat creditor from taking any separate or effective 
step on his own account in furtherance of his claim; and the proceedings 
for the receivership is in the nature of judicial process by which the rights 
of the general eredttors are "fastened upon the property," — The Observer 
Co. T. Little, ITS N. C. 42, 94 8. E. SZfl. 

ItVMlvera S77. The title to the property of a corporation vesta in the 
receiver at tne time he has been duly appointed by the court, from which 
time tlt'e corpdration is divested thereof, and a judgment against the cor- 
poration entered thereafter, but before the docketing of the order or the 
qualifying of the receiver thereunder, can acquire no lien in favor of the 
judgment creditor. — Odell Hardware Co. v. Holt-Morgan Mills, 173 N. C. 
308, 92 8. E. 8. 

Becalvers g77. A judgment rendered against a corporation doea not re- 
late back, by implication of law, to the beginning of the term, so as to 
create a lien on the corporate property as against the vesting of the lien 
in a receiver, who had in the meanwhile been appointed. — Ibid. 

Bocelvon §77. The receiver holds the legal title to corporate property, 
but he holds it for the benefit of the eqtdtable owner, the corporation, 
whose property is to be administered by him under the orders of the court. 
— Sonthem Pants Co. v. Rochester Qerman Ins. Co., 159 N. C. 78, 74 
8. E. 812. 

Oorpontloiu g 660. Where a prior deed of trnst was insufficient to create 
a lieu aa against creditors and purchasers because insufSciently probated, 
the receiver took the property freed from the lien of the deed, and a deed 
by the receiver made pursuant to orders of the court passed the title free 
from the deed of trust.— Witherell v. Murphy, 154 N. 0, 82, 69 8, B, 748. 

K«ceiVOn § 180. The failure to name the corporation waa not error, since 
an action against the receivers of an insolvent corporation is in ^eet an 
action against the corporation. — Hollowell v. Norfolk Sonthem R. Co., 153 
N. C. 19, 68 B. E. 894; Eessenger v. Fitzgerald, 152 N. C. 247, 67 8. K. 588. 

8ee Black v. Consolidated Bailway & Power Co., 198 N. C. 468, 74 8. E. 
468. 

BMClven g70. The title of a receiver relates only to the time of his 
appointment, and any liens existing at that time are not divested. — Roberts 
V. Bowen Mfg. Co., 169 N. C. 27, 85 8. E. 45; Battery Park Bank v. Weatem 
Carolina Bank, 127 N. C. 432, 37 8. B. 461. 

Kdcelvers g 77. Property in the hands of a receiver cannot be sold under 
execution without leave of court. — Pelletier v. Greenville Lumber Co., 123 
N. G. 596, 31 8. E. 855. 

B«calv«ra §71. A receiver's possession is that of the court, takan for 
the purpose of securing the thing in controversy, so that it may be subject 
to such disposition as the court may finally decide. — Gobbls-v, OrralL 163 
N. C. 489, 79 8. E. 957. , ,-,.i,,, CtKlOlC 



NOBTH CAS0LU4A COBPOBATION CODE , 105 

143. Hay send for penons and papera; penal^ Im- reftuing 
to answer. Tlie receiver has power to send for persons and pa- 
pers, and to ezamine any persons, including tlie creditors, claim- 
ants, president, directors, and other officers and agents of the 
corporation, on oath or afBrmation (which oath or affirmation the 
receiver may administer), respecting its affairs and transactions 
and its estate, maoey, goods, chattels, credits, notes, bills, chosea in 
action, real and personal estate and effects of every kind ; and also 
respecting its debts, obligations, contracts, and liabilities, and the 
claims against it; and if any person refuses to be sworn or af- 
firmed, or to make answers to such questions as may be put to 
him, or refuse to declare the whole truth touching the subject- 
matter of the examination, the court may, on report of the re- 
ceiver, commit such person as for contempt. 
C. S., B. 1211; Rev., a. 1237; 1001, c. 2, s. 78. 
Bee Black v. Consolidated Bailway t Power Co., 158 N. C. 468, 74 S. E. 

m. 

144. Protd of claims; time limit. All claims against an insol- 
vent corporation must be presented to the receiver in writing; 
and the claimant, if required, shall submit himself to such exami- 
nation in relation to the claim as the receiver directs, and shall 
produce such books and papers relating to the claim as shall be 
required. The receiver has power to examine under oath or af- 
firmation all witnesses produced before him touching the claim, 
and shall pass upon and allow or disallow the claims or any part 
thereof, and notify the claimants of his determination. The court 
may limit the time within which creditors may present and prove 
to the receiver their respective claims against the corporation, and 
may bar all creditors and claimants failing to do so within the 
time limited from participating in the distribution of the assets 
of the corporation. The court may also prescribe what notice, by 
publication or otherwise, must be given to creditors of such limi- 
tation of time. 

C. 8., I. 1313; Bev., gs. 1228, 1229; 1901, o. 2, as. 81, 82. 

BAcalven g 174. In order to maintain an action aKainat the receiver, 
plaintiff's claim must be firat presented to the receiver and leave obtained 
from the court to begin a separate action. — Black v. Consolidated Bailwa; 
k Power Co., 158 N. 0. 408, 74 S. S. 468. 

B»c«lTon g 174. In determining whether good cause ia shown for sep- 
arate action against receiver of an insolvent corporation, the convenience of 
witnesses, additional eost, and various circumstances addressed to the 
trial court's discretion should be considered. — Ibid. 



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106 North Carolina Corporation Code 

that every cIbiiii against the corporation shall be preseatwi to the r 

and he is given full power to investigate. — Pelletier v. Oreenville Lumbei 

Co., 123 N. C, 595, 31 8. E. 855; CrutfhfieW v. Hunter, 138 N. C. 54, 50 

S. E. 557. 

145. Report on claims to court; exertions and jury trial. It 
is the duty of the receiver to report to the term of the superior 
court subsequent to a finding by him as to any claim against the 
corporation, anil exceptions thereto may be filed by any person 
interested, within ten days after notice of the finding hy the re- 
ceiver, and not later than within the first three days of the said 
term ; and, if, on an exception so filed, a jury trial is demanded, it 
is the duty of the court to prepare a proper issue and submit it 
to a jury ; and if the demand is not made in the exceptions to the 
report the right to a jury trial is waived. The judge may, in his 
discretion, extend the time for filing such exceptions. 

C. S., s. 1213; Rev., s. 12!0; 1901, p. 2, 8. 82. 

See Black v. Consolidated Rj. &, Power Co., 158 N. C. 468, 74 8. E. 46S. 

146. Propwty sold pending litigation. When the property of 
an insolvent corporation is at the time of the appointment of a 
receiver incumbered with mortgages or other liens, the legality 
of which is brought in question, and the property is of a char- 
acter materially to deteriorate in valufi pending the litigation, 
the court may order the receiver to sell the same, clear of incum- 
brance, at public or private sale, for the best price that can be ob- 
tained, and pay the money into the court, there to remain subject 
to the same liens and equities of all parties in interest as was the 
property before sale, to be disposed of as the court directs. 

C. S., s. 1214; Rev., b. 1232; 1001, c. 2, s. 86. 

147. Compensation and expenses. Before distribution of the 
assets of an insolvent corporation among the creditors or stock- 
holders, the court shall allow a reasonable compensation to the 
receiver for his services, not to exceed five per cent upon receipts 
and disbursements, and the costs and expenses of administration 
of his trust and of the proceedings in said court, to be first paid 
out of said assets. 

C. S., B. 1215, Rev., s. 122G; 1901, c. 2. s. 88. 

Ootpoiations §480. The pavmcut of receiver's post does not pontpona 
lien of purchase money mortg.igee to tlic pavment of such costs.— I Turn- 
phre? Bros. v. Buell-Crockcr Lumber Co.. 174 N. C. .514, 93 S. E. 971. 

Corporations §566. Crosts and legitimate expenses in n suit to distrib- 
ute the assets of an insolvent corporation must be paid out of the funds 
of the corporation, and the balance must be distributed amoiiB the crcil- 
itors accordioR to priority. — HicltBon Lumber Co. v.Gnv Lumber Co. ISO 
N. C. 281, 63 S. E. 1048. 

DiclzedbyCoO^^IC 



NOETH CAEOLINA COBPOEATION CODE 107 

1 gl54. The altonanee of cominigBionB and couDsel fees to a 
rcreivcr by the supprior court is prima fauie correct, and the Supruiue Court 
will alter the same only when they are clearly Inadequate or eicesBive. — 
Orataam v. Carr, 133 N. C. 549; 45 S. E. 847. 

BecalvetB g 197. A Teceiver may be aUowed commUBians on both receipts 
and disbQTBemetits to the extent of 5 per cent on each. — Battery Park Bank 
V. WeBtern Carolina Bank, 126 N. 0. 531, 36 8. B. 3B. 

B«cetT«rs g 199. A receiver may be paid at stated intervals during the 
continnaace of his fanctions, and need not wait antil the termination of 
his trust.— Ibid. 

Kecolvers g 196^-The commissions of the receiver of an insolvent cor- 
poration are to be included in expenses, and not classed as a debt.^Wilsou 
Cotton MillB V. Bandleman Cotton Mills, 115 N. C. 475, 20 S. E. 770. 

148. Debts provided tor, reoeirer discharged. When a re- 
ceiver has been appointed, and it afterwards appears that the 
debts of the corporation have been paid, or provided for, and 
that there remains, or can be obtained by further contributions, 
sufiScient capital to enable it to resume its business, the court 
may, in its discretion, a proper case being shown, discharge the 
receiver, and decree that the property, rights, and franchises of 
the corporation revert to it, and thereafter the corporation may 
resume control of the same, as fully as if the receiver had never 
been appointed. 

C. a, s. 1216; Eev., b. 1320; 1901, c. 2, a. 76. 

140. Keorganization. When a majority in interest of the stock- 
holders of the corporation have agreed upon a plan for its re- 
organization and a resumption by it of the msnagement and con- 
trol of its property and business, the corporation may, with the 
consent of the court, upon the reconveyance to it of its property 
and franchises, either by deed or decree of the court, mortgage 
the same for an amount necessary for the purposes of the reor- 
ganization; and may issue bonds or other evidences of indebted- 
ness, or additional stock, or both, and use the same -for the full or 
partial payment of the creditors who will accept the same, or 
otherwise dispose of the same for the purposes of the reorgani- 
zation. 

C. S., a. 1217; Eev., ■. 1321; 1001, e. 3, s. 27. 

ART. 11. TAXES .AND FEES. 

160. Tf^es f<M- filing. For filing a certificate or other paper 
in the office of the secretary of state, for the corporate purposes 
named below, the following taxes shall be paid to the state treas- 
urer for the use of the state: Di:iiizjdb,CjOO'^Ic 



108 NOETH Cabolina Coepobation C<M)E 

1. Certificate of ineorporatioD, or extension or renewal of cor- 
porate existence, 40 cents for each $1,000 of the total amount of 
capital stock authorized, but in no case less than $40. 

2. Increase of capital stock, 40 cents for each $1,000 of the total 
increase authorized, but in no case less than $40. 

3. Change of name or nature of business, amended certificate 
of incorporation (other than those otherwise provided for in this 
section), decrease of capital stock, increase or decrease of par 
value or number of shares, $40. 

4. Dissolution or change of principal place of business, $5. 

The above taxes are not ciunulative, but when two or more 
are incurred at the same time, the largest single tax applicable 
shall apply. No such taxes need be paid by a benevolent, relig- 
ious, educational, or charitable organization with no capital stock, 
or by a corporation created by virtue of section 1123 (herein 13) 
under this chapter for public parks and drives. 

C. 8., 8. 1218; Bev., s. 1233; 1901, c, 2, h. 9fi; 1911, c. 155, t. 5; Ei. Se«- 
aion 1920, e. 1, a. 7e. 

161. Fees to secretary of state and clerk of superior court. The 
secretary of state shall collect and retain the following fees : For 
recording the certificate of incorporation, one dollar for the first 
three copy sheets and ten cents for each copy sheet in excess 
thereof, and for official seal one dollar; for copying, the same 
fees as for recording. There shall be paid the clerk of the su- 
perior court for recording the certificate of incorporation a fee 
of three dollars. 

0. 8., B. 1219; Rev., 8. 1334; CoAe, s. 680; 1893, e. 318, a. 4; 1901, c. 2. b. 
96; 1917, c. 231, a. 84. 

162. Corporate property in receiver's hands liable for taxes. 
When listed or unlisted taxes are duly assessed and charged 
against and are due and unpaid by a corporation with chartered 
rights, doing business or with property in this state, or against 
a person residing in, doing business, or having property in this 
state, it is competent for an officer or tax collector who has the 
tax list to levy upon, seize, and take possession of that part of the 
property belonging to the corporation necessary to pay such 
taxes, even though the property is in the hands of a receiver duly 
appointed ; and the officer or collector need not apply to the 
court appointing the receiver, or with jurisdiction of the prop- 
erty or the receiver, for an order for the payment of said taxes. 



North Cabolina Corporation Code l(>9 

Thia section applies to all taxes, whether state, county, town or 
municipal, and shall be liberally constnied in favor of and in 
furtherance of the collection of such taxes. 
C. 8., s. 1220; Bev., aa. 1230, 1237; Code, as. 609, 670. 

ART. 12. REORGANIZATION. 

103. Corporatioiu whose property and franohiseB sold under 
order of court or ezeontion. When the property and franchises 
of a public-service corporation are sold under a judgment or de- 
cree of a court of this state, or of the district court of the United 
States, or under execution, to satisfy a mortgage debt or other 
encumbrance thereon, such sale vests la the purchaser all the 
right, title, interest and property of the parties to the action in 
which such judgment or decree was made, to said property and 
franchise, subject to all the conditions, limitations and restrictions 
of the corporation; and the purchaser and his associates, not 
less than three in number, thereupon become a new corporation, 
by such name as they select, and they are the stockholders in the 
ratio of the purchase money by them contributed ; and are entitled 
to all rights and franchises and subject to all the conditions, limi- 
tations and penalties of the corporation whose property and fran- 
chises have been so sold. In the event of the sale of a railroad 
in foreclosure of a mortgage or deed of trust, whether under a 
decree of court or otherwise, the corporation created by or in 
consequence of the sale succeeds to all the franchises, rights and 
privileges of the original corporation only when the sale is of 
all the railroad owned by the company and described in the 
mortgage or deed of trust, and when the railroad is sold as an 
entirety. If a purchaser at any such sale is a corporation, such 
purchasing corporation shall succeed to all the properties, fran- 
chises, powers, rights, and privileges of the original corporation : 
Provided, that this shall not affect vested rights and shall not be 
construed to alter in any manner the public policy of the state 
now or hereafter established with reference to trusts and con- 
tracts in restraint of trade. 

1. 697, 6B8; 1897, c. 305; 1901, c. 2, a. 

Corpoistlona § 675. A judicial sale of the property aod franchiaaa of a 
eoTporatioD effectually deBtroya or annuls tlie stock hoJdiQgB of the former 
BtockholderH. — Pocahontas Fuel Co. v. Tarboro Cotton Factory, 174 N. C. 
245, 93 8. E. 790; Wood v. Staton, 174 N. C. 245, 93 8. E. 794. 

CoiporAUons g 672. The Court maj decree a aale of the corporate fran- 
ehias with the property conferring upon the purchaaera the right to reor- 
ganize a new corporation. — Ibid. 



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110 North Carolina Corporation Code 

Corporations § 672. Statute applies onlv to outright purchase of prop- 
erty under an execution or judiciill Bale and uot to a lease of property. — 
Hyder v. Southern R. Co., 167 N. C. 584, S3 S. E, (i89. 

Oorporatioas §6S2. A railroad eorporation of nnotlit-r state pun-hasiiig 
the property of a railroad eotporation of thJH state at a foreclosure sale 
under a mortgage or deed of trust becomes a uew corporation of this Btate 
to the extent of the franehiie of the domestic eor|>oraUon thus acquired. — 
Hurst V. Southern Railway Co., 162 N. C. 3fi8, ,78 S. E. i'M. 

Corporations §603. Where a sale is made under u deed of trust or mort- 
gage, executed by any corporation on all its -works and property, upon con- 
vcyanee to the purehaserj the corporation is ipso lacto dissolved. — Latta 
V. Catawba Electric & Power Co., 146 N. C. 285, 39 S. K. 1028. 

Corporations §632. Where a foreign i-orporation bought in railroud 
property at a sale under mortgage, it became a new domestic corporation, 
sub.iect to the jurisdiction of the state courts.— (^arolina Conl & Ice Com- 
pany V. Southern B. Co., 144 N. C, 732, 57 S. E. 444. 

Corporations §632. The sale and eouveyance of the property and fran- 
chise of the Western North Carolina Railroad Company, made by a special 
master to the Southern Railway Company, a foreign corporation, 
under a decree of foreclosure of a second mortgage, subject to an ex- 
isting first mortgage, did not ip.^o facto make the purchase a domestic 
eorporation, nor did such sale aiid purchase make the Western North (Caro- 
lina Railroad Company an integrn! part of the Southern Bailway Com- 
pany.— James V. Western North Carolina Railroad CompanT, 121 N. C. 523, 
28 S. E. 537. 

Corporate property of a North Carolina railroad company, covered by, a 
legally authorized mortgnge of nil its franchise and proiierty, iIoi'b uot con- 
tinue liable for tha debts of such company accruing after the sale on thi> 
foreclosure proceedings to a uouresident railroad company authorized by its 
charter to mnkc the purchase, because of the failure of the latter to exercise 
the privilege of organising a domestic corporation to operate the purchased 
property. — Julian, Sheriff, and James, Administratrix, v. Central Trust Com- 
pany aiid Southern Railway Co., 193 U. S. 93, 48 Law. Ed. 629, 24 S. Ct. 399. 

164. New owners to meet and organize. The persons for whom 
the property and franchises have been purchased shall meet 
within thirty days after the delivery of tlie conveyance made by 
virtue of said process or decree, and urganize the new corpora- 
tion, ten days ivritten notice of the time and place of the meeting 
having been given to each of the said persons. At this meeting 
they ahall adopt a corporate name and seal, determine the amount 
of the capital stock of the corporation, and shall have power and 
authority to make and issue Certificates of stock in shares of 
such amounts as they see fit. The corporation may then, or at 
any time thereafter, create and issue preferred stock to such an 
amount, and at such time, as they may deem necessary. 

C. R., B. 1322; Rev., ss. 1239, 1240; IflOl, c. 2, ss. 100, 101, 102. 

Corporations § 221. Where the purchasers of the entire property of ft de- 
funct corporation under the decree of the court have in other respects com- 
plied with the requirements of the statute as to reoi^anization, tho fact that 
ther have assumed to continue operations without changing the seal, or 



DidilzedbyCoO^IC 



North Carolina Corpobation Code 111 

determine upon a different amount of capitalization, doee not .uet'ossarily 
affect the fact of proper reorgauiisatioii, tliere being no statutory require- 
ment to change them.— Wood v. Stnton, 174 N. C- 245, 9S 8. E. 794; Poca- 
hontaa Fuel Co. v. Tarhoro Cotton Factory, 174 N. C. 245, 03 S. K. 790. 

166. Certiflcate to be filed with seciretary of state. It U the 
duty of the new corporation, within one month after its organi- 
zation to make certificate thereof, under its common seal, 
attested by the signature of its president, specifying the date of 
the organization, the name adopted, the amount of capital stock, 
and the names of its president and directors, and transmit the 
certificate to the secretary of statf, to be filed and recorded in 
his office, and there remain of record. A certified copy of this 
certificate so filed shall be recorded in the oflRee of the clerk of 
the superior court of the county in which is located the principal 
office of-the corporation, and is the charter and evidence of the 
corporate existence of the new corporation.* 
C. S., a. 1223; Rev., s. 1341; 1901, e. 2, e. 103. 

166. Effect on liens .and other rights. Nothing contained in 
this article in any manner impairs the lien of a prior mortgage, 
or other encumbrance, upon the property or franchises conveyed 
under the sale, when by the terms of the process or decree under 
which the sale was made, or by operation of law, the sale was 
made subject to the lien of such prior mortgage or other en- 
cumbrance. No such sale and conveyance or organization of 
such new corporation in any way affects the rights of any persim 
body politic, or corporate, not a party to the action in which the 
decree was made, nor of the said party except as determined by 
the decree. When a trustee has been made a party to such action 
and his cestui que trust, for reason satisfactory to the court, has 
not been made a party thereto, the rights and interest of the 
cestui que trust are concluded by the detree. 
C. 8,, 8. 1224; Rev., b. 1241; 1901, c. 2, i 103. 



:dbv Google 



CHAPTER U. 

VAEIOUS STATUTES AFFECTING CORPORATIONS. 

ART. 1. CEIMINAL LIABILITY OF COEPOHATE OFFICERS AND 
EMPLOYBEe. 

Section 

Malfeasance of bank officers and agents 15T 

Making false entries in banking accounts; misrepresenting assets and 

liabilities of bank IBS 

Influencing agents and servants in violating duties owed employers 159 
Witness required to give self- criminating evidence; no suit or prose- 

.cution to be founded thereon 160 

Blacklisting employees 161 

Conspiring to blacklist employees ■ 162 

Issuing nontransferable script to laboiers 163 

ABT. 2. CHILD WELFABE. 

Employmenf of children under fourteen regulated 164 

Prohibited employments of children under sixteen '. 165 

Age certificates l5j5 

Commission may employ agents 16T j 

Inspection by agents; .obstruction unlawful '. 16S 

Expenses of commission 169 

Violations of this article and of certain otber laws a misdemeanor . ITO 

ABT. 3. COBPOBATIOK'8 DUTY TO EMPLOYEES. 

Week's work to be sixty hours 171 

Seats for women eraployees; failure to provide, a misdemeanor ■ - 1T£ 

Medical ehests in factories; failure to provide, a misdemeanor . . 173 

Shelter at railroad division points required; failuto to provide, a tnla- 

demeanor . 174 

Bailroad employees to be paid twice a month ■ . . 175 

When separate toilets required 176 

Location; intruding on toilets, a misdemeanor 177 

Failure to provide toilets a misdemeanor 178 

Police in towns to enforce article 179 

Sheriffs in counties to enforce article 180 

Counties exempted from article 181 

Construction of buildings regulated ' 163 

Places of public amusement, how constructed 1S3 

Doors in certain bbilding to Open outwardly 184 

Fire-escapes to be provided 185 

Ways of escape provided 186 

Enforcement by insurance eommissioner 1S7 

ABT. 4. H0UH8 OP SEBVICE FOE EMPLOYEES OF CABBIEBS. 

Maximum continuoos service 188 

Penalty for violation 189 

CoVporation commission's power 190 

ABT. 5. EABNING8 OF EMPLOYEES IN INTEBSTATE COMMERCE. 

Collection out of state to avoid exemptions forbidden ..... 191 

Resident not to abet eolleetion ont of state 192 

Remedies for violation of two preceding sections; damages; indictmeat 193 

Institution of foreign suit, etc., evidence of intent to violate . . IM 

ConatnictiOD of article r-" t >-,[■, - 1*5 

DiL|ilz!:dbvVjOtjQIC 



NoBTH Carolina Cwporation Code 113 

AKT. 1. CRIMINAL LIABILITY OP CORPORATE OFFICERS 
AND EMPLOYEES. 

157. Halfsasanoe of bank officers and agents. If any preu- 
dent, director, cashier, teller, clerk or agent of any bank or otker 
corporation shall embezzle, abatract or willfully misapply any of 
the moneys, fijnda or credits of the bank, or shtdl, without author- 
ity from the directors, issue or put forth any certificate of de- 
gosit, draw any order or bill of exchange, make any acceptance, 
assign any note, bond, draft, bill of exchange, mortgage, jad^ 
ment or decree, or make any false entry in any book, report or 
statement of the bank wjth the intent in either ease to injure or 
defraud or to deceive any ofiBcer o£ the bank, or if any person 
shall aid and abet in the doing of any of these things, he shall 
be guilty of a felony, and upon conviction shall be imprisoned in 
the state's prison for not less than four months nor more than 
fifteen years, and likewise fined, at the discretion of the court. 

C. S., a. 4401; Bev., a. 3325; 1803, c. 275, b. 15. 

168. Making false enteies in banking aecoiuts; misre^'eMnt- 
ing assets and liabilitieB of banks. If any person shall veillfully 
and knowingly subscribe to, or make, or cause to be made,, any 
false statement or false entry in the books of any corporation, 
partnership, firm or individual transacting a banking business, 
or shall knowingly subscribe to or exhibit false papers, with the 
intent to deceive any person authorized to examine into the af- 
fairs of such corporation, partnership, firm or individual, or shall 
willfully and knowingly make, state or publish any false state- 
ment of the amount of the assets or liabilities of any such corpo- 
ration, partnership, firm or individual, he shall be guilty of a 
felony, and upon conviction thereof shall be imprisoned in the 
state's prison not less than four months nor more than ten years. 

C. a, B. 4402; Bev., ■. 3326; 1903, e. 215, a. 27. 

1S9. Inflobnoiiig agents and sarvants in violating dnties owed 
employers. Any person who gives, offers or promises to an agent, 
employee or servant any gift or gratuity whatever with intent 
to influence his action in relation to his principal's, employer's 
or master's business; any agent, employee or servant who re- 
quesfs or accepts a gift or gratuity or a promise to make a gift 
or to do an act beneficial to himself, under an agreement or with 
an understanding that he shall act in any particular manner in 
relation to his principal's, employer's or master's business; any 
agent, employee or servant who, being authorized to procure 



114 North Cabouna Corporation Goi^ 

materials, supplies or other articles either by purchase or con- 
tract for his principal, employer or master, or to employ service 
or labor for his principal, employer or master, receives, directly 
or indirectly, fpr himself or for another, s commission, discount 
or bonus from the person who makes such sale or contract, or 
furnishes such materials, supplies or other articles, or from a per- 
son who renders such service or labor ; and any person who gives 
or offers such an agent, employee or servant such commission, 
discount or bonus, shall be guilty of a misdemeanor and shall be 
pnnished in the discretion of the court, 
C. S., B. «7E; 1913, c. IPO, a. 1. 

160. Witness required to give self-crlminatinfr evidence; no 
suit or prosecution to be founded thereon. No person shall be 
excused from attending, testifying or producing books, papers, 
contracts, agreements and other docTunents before any court, or 
in obedience to the subpoena of any court, having jurisdiction of 
the crime denounced in the preceding section, on the ground or 
for the reason that the testimony or evidence, documentary or 
otherwise, required of him may tend to incriminate him or to 
subject him to a penalty or to a forfeiture; but no person shall 
be liable to any suit or proscQution, civil or criminal, for or on 
account of any transaction, matter or thing concerning which he 
may testify or produce evidence, documentary or otherwise, be- 
fore such court or in obedience to its subpoena or in any such 
case or proceeding: Provided, that no person so testifying or 
producing any such books, papers, contracts, agreements or other 
documents shall be exempted from prosecution and punishment 
for perjury committed in so testifying, 

C. S., B. 4476; 1913, c, IBO, 8. 2. 

161. Blacklisting employees. If any person, agent, company 
or corporation, after having discharged any employee from his or 
its service, shall prevent or attempt to prevent, by word or writ- 
ing of any kind, such discharged employee from obtaining em- 
ployment with any other person, company or corporation, such 
person, agent or corporation shall be guilty of a misdemeanor 
and shall be punished by a fine not exceeding five hundred dol- 
lars; and such person, agent, company or corporation shall be 
liable in penal damages to such discharged person, to be recov- 
ered by civil action. This section shall not be construed as pro- 
hibiting any person or agent of any company or corporation from 
fumisliing in- writing, upon request, any other person, company 
or corporation to whom. such discharged person or employee has 

r,.„z.dbX.003lc 



North Carolina Cow^ration Code 115 

applied for employment, a truthful statement of tlie reason for 

such discharge. 

C. a., a. 4477; 3009, e. 858, s. 1. • 

Master ft Serrsnt g32. Under the common law nn employer would not 
be liable in damages if in good faith he made a report of the character of 
his discharged employee to another who was considering engaging hia 
services; but if the report was knowingly false, or if it was mnlieiously 
made, it was aetionable.^ — Seward v. Receivers of Seaboard Air Line, 159 
N. C. 241, 75 S. B. 34. 

Maatei ft Barvaat g 32. When a report is made by one railroad company 
to another upon a ilischnrged engineer, the report 1$ regarded as privileged, 
and in the absence of express malice no cause of action can be based on its 
publication. — Ibid. 

162. ConBpiring to blacklist employees. It shall be unlawful 
for two or more persons to agree together to blacklist any dis- 
charged employee or to attempt, by words or writing or any other 
means whatever, to prevent such discharged employee, or any 
employee who may have voluntarily left the service of his em- 
ployer, from obtaining emplojTnent with any other person or 
company. Persons violating the provisions of this section shall 
be guilty of a misdemeanor and shall be fined or imprisoned, or 
both, at the discretion of the court. 

C. 8.. 8. 4478; 1S09, c. 858, s. 2. 

163. Issuing nontransferable script to laborers. If any person 
who employ's laborers by the day, week or month shall issue in 
payment for the .services of such laborers any ticket, certificate 
or other script bearing upon its face the word "nontransferable," 
or shall issue such ticket, certificate or other script in any form 
that would render it void by transfer from the person to whom 
issued, or shall refuse to pay to the person holding the same its 
face value, he shall be guilty of a misdemeanor and upon convic- 
tion thereof shall be fined not less than ten dollars nor more than 
fifty dollars for each offense, or imprisoned not more than thirty 
days. 

C. S., s. 4479; Bev., s. 3730; 18W9, e. 280; 1S91, .-. 7fi; 1891, p. 4,ir.: 1891, c. 
46; 1S91, cc. 167, 370; 1895, c. 127; 1891, ec. 167, 456. 

An assignee of an order payable in merchandise for labor done is not 
entitled to demand and receive payment in mouev, instead of merchandise. — 
Marriner v. Roper Company, 112 N. ('. 164, 16 S. E. 90fi. 

ART 2. CHILD WELFARE. 

164. EmploTment of children under fourteen regulated. No 
child under the age of fourteen years shall be employed, jor per.- 



116 NOBTH CABOLINA C(HtPORATION CODE 

mitted to work, in or about or in connection with any mill, fac-. 
tory, cannery, workshop, manufacturing establiahmeot, laundry, 
bakery, mercantile establishment, office, hotel, restaurant, barber 
shop, bootblack stand, public stable, garage, place of amusement, 
brick yard, lumber yard, or any messenger or delivery service, 
except in cases and under regulations prescribed by the commis- 
sion herein created. The employments in this section enumerated 
shall not be construed to include bona fide boys' and girls' can- 
ning clubs recognized by the agricultural department of this 
state; and such canning clubs are hereby expressly exempted 
from the provisions of this article. 
C. S., B. S032i 1919, c. 100, s. 5. 

166. Prohibited employments, of children under Bizteen. No 

person under sixteen years of age shall be employed, or per- 
mitted to work, at night in any of the places or occupations re- 
ferred to in the first preceding section, between the hoiU'B of 
nine p. m. and six a. m., and no person under sixteen years of age 
shall be employed or permitted to work in or about or in connec- 
tion with any quarry or mine. 
C. S., B. S033; 191B, c. 100, 8. 6. 

166. Age certificates. K the employer of any person under six- 
teen years of age shall, at the time of such employment, in good 
faith, procure, rely upon, and keep on file a certificate issued in 
such form and under such conditions and by such persons as the 
said commission herein provided for shall prescribe, showing that 
the person is of legal age for such employment, such certificate 
shall be prima facie evidence of the age of the person and the 
good faith of thp employer. No person shall knowingly make a. 
false statement or present false evidence in or in relation to any 
such certificate or application therefor, or cause any false state- 
ment to be made which may result in the issuance of an improper 
certificate of employment. 

C. S., 8. S034; 1919, c. 100, a. 10. 

167. Oommission may employ agents. The commission shall 
have authority to appoint and employ such agents for the pur- 
pose of enforcing the provisions of this article as may be found 
to be necessary, and they may use the county superintendent of 
public welfare or chief school attendance oflScer or truant offi- 
cer of the several counties for the purpose of carrying out such 
provisions, and they may use the agents specially designated for 
carrying out the provisions of this article to aid in carrying out 

DidilzedbyCoO^IC 



North Carolina Corporation Code 117 

the provisiona of the general compulsory school attendtuiee law 
under aubchapter nine (IX) of the chapter on education. 
C. 8^ B. 5035; 1819, c. 100, b. 9. 

168. Inspection by a^fents; obstruction unlawful. For the pur- 
pose of ficcuring the proper enforcement of the provisiona of this 
article and of the laws relating to seats for women employees, and 
the laws requiring separate toilets for sexes and races, the com- 
mission, or its duly authorized agents, shall have authority to enter 
and inspect, at any time, mines, quarries, mills, factories, can- 
neries, workshops, manufacturing establishments, laundries, bak- 
eries, mercantile establishments, offices, hotels, restaurants, barber 
shops, bootblack stands, public stables, garages, places of amuse- 
ment, brick yards, lumber yards, and other places of employment ; 
and it shall be unlawful for any person, firm, or corporation to 
refuse permission to enter, obstruct, or prevent any duly author- 
ized agent of the commission in bis effort to make the inspection 
herein provided for. 

C. 8., 1. 5036; 1919, c. 100, s. S. 

169. Expenses of commissioD. The state treasurer shall honor 
all warrants for necessary expenses incurred by the commission 
for meeting the salaries and expenses of any agents employed, 
by the commission in the enforcement of this article, and the nec- 
essary expenses incurred by the commission in carrying out the 
provisions of this article, out of funds not otherwise appropriated, 
such warrants to be drawn upon the state auditor by the com- 
mission hereby created, or its duly authorized agent. Such ex- 
penses so incurred shall not exceed the sum of six thousand dol- 
lars per annum. 

C. S., H. 5037; lOlfl, e. 100, s. 11. 

170. Violations of this article and of certain other laws a mis- 
demeanor. Any person, firm, or corporation violating any of the 
provisions of this article, or of the laws relating to seats for 
women employees or of the laws requiring separate toilets for 
sexes and races, shall be guilty of a misdemeanor, and punished by 
fine or imprisonment, or both, within the discretion of the court. 

C. S., 8. 5038; 1919, c, 100, B. 12. 

ART. 3. CORPORATION'S DUTY TO EMPLOYEES. 

171. Week's work to be sixty hours. Sixty hours shall consti- 
tute a week's work in all factories and manufacturing establish- ' 
ments of the state, and no minor nor woman shall be worked in 
such factory or establishment a longer period than sixty hours in 

D,:|,lz.db.CA>O^IC 



118 North Carolina Corporation Code 

one week and do adult male shall be worked in such factory or 
establishnient for a longer period than sixty hours in one week 
unless there shall be a written contract entered into between said 
adult male and his employer to that effect in which the employer 
shall agree to pay said adult male extra compensation for extra 
h.ours he may work. No employee in any factory or manufactur- 
ing establishment in this state shall be worked exceeding eleven 
hours in any one day: Provided, this section shall not apply to 
engineers, firemen, superintendents, overseers, section and yard 
hands, office men, watchmen, or repairers of breakdowns. 
C. S,, a. 6;»4; 1915, c 14S, s. 2. 

172. Seats for women employsee; fulnre to provide a misde- 
meanor. All persons, firms, or corporations who employ females 
in a store, shop, office, or manufacturing establishment, as clerks, 
operatives, or helpers in any business, trade, or occupation car- 
ried on or operated in the state of North Carolina, shall be re- 
quired to procure and provide proper and suitable seats for all 
such females, and shall permit the use of such scats, rests, or stools 
as may be necessary, and shall not make any rules, regulations, or 
orders preventing the use of such seats, stools, or rests when any 
such female employee or employees are not actively employed or 
engaged in their work in such business or employment. 

If any employer of female help in the state of North Carolina 
shall fail, neglect, or refuse to provide seats, as provided in this 
article, on or before the first day of June, one thousand nine hun- 
dred and nine, or shall make any rules, orders, or regulations in 
his or its shop, store, or other place of business requiring females 
to remain standing when not necessarily employed or engaged in 
service or labor therein, he shall be guilty of a misdemeanor, and 
upon conviction thereof shall be fined not less than twenty-five 
dollars nor mnre th.nn one hundred dollars, in the discretion of 
the court. 

C. S., s. 6555; 1909, c. 857, ea. 1, 2. 

173. Medical chests in factories; failure to provide a misde- 
meanor. Every person, firm, or corporation operating a factory 
or shop employing over twenty-five laborers, in which machinery 
is used for any manufacturing purpose or for any purpose except 
for elevation or for heating or hoisting apparatus, shall at al! 
times keep and maintain free of expense to the employees a medi- 

. cal or surgical chest which shall contain two porcelain pans, two 
tourniquets, pauze, absorbent cotton, adhesive plasters, bandages, 
antiseptic soap, one bottle of carbolic acid with directions on bot- 

DiclzedbyCoO^IC 



North Cabolina Cdeporation C<»)G ii9 

tie, one bottle antiseptic tablets, one pair of scissors, one folding 
gtreteher, all of which shaU not cost to exceed ten dollars, for the 
treatment of persons injured or taken ill upon the premises. 

Any person, firm, or corporation violating this seotioa shall be 
gubject to a fine of not less than five dollars nor more than twenty- 
five dollars for every weeh during which such violation continues. 

r. R., a. r-,r,G: 1811, c. 57. 

174. Shelter at railroad division pointe required ; faihire to pro- 
line a misdemeanor. It shall be the duty of every person, firm, 
or corporation that may now or hereafter own, control, or 
operate any line of railroad in the state of North Carolina, to erect 
and maintain at every division point where cars are regularly 
taken out of trains for repairs or construction work, or where 
other railroad equipment is regularly made, repaired, or con- 
structed, a building or shed with a suitable and sufficient roof 
over the repair and construction track or tracks so as to provide 
that all men or employees permanently employed in the construc- 
tion and repair of cars, trucks, or other railroad equipment of 
whatever description shall be under shelter and protected during 
snows, raiDs, sleets, hot sunshine, and other inclement weather: 
Provided, the corporation commission shall have the power to 
direct the points at which sheds shall be erected, and the char- 
acter of the sheds : Provided further, that such order shall only 
be made after a hearing of which public notice shall have been 
given. 

On and after the first day of December, nineteen himdred and 
thirteen, any person, firm, or corporation failing to comply with 
the requirements of this section shall be guilty of a misdemeanor, 
and for each offense shall be fined not less than one hundred dol- 
lars nor more than five hundred dollars. Each day of such failure 
shall constitute a separate offense. 
C. S., 8. 6557; 1913, c 65; 1913, r. 117. 

176. Railroad employees to be paid twice a month. All per- 
sons, firms, companies, corporations, or associations owning, leas- 
ing, or operating any railroad or railroads, wholly or partially 

within this state, shall pay and settle with their employeee 
engaged or employed in shops, round-houses, or repair shops 
within this state at least twice in each month, which settlements 
shall not be less than two weeks nor more than three weeks apart, 
and shall, in such settlements, pay sueh employees the full 
amounts due them for their work and services up to the date ol 
the preceding settlement, and such payment shall be made in law- 

DiyilzcdbvCoO^IC 



120 North Carolina Corporation Code 

fill money of the United States, or by cheek or cudi order redeem- 
able by the maker thereof for its face valae in lawful money of the 
United States upon demand of or presentation by the lawful 
holder thereof: Provided, this section shall not apply to repair 
shops where less than ten employees are engaged. 
C. S., B. 65SS; 1915, c. 92.' 

176. When separate toilets required. All persoDB and corpo- 
rations employing males and females in any manufacturing indus- 
try, or other business employing more than two males end females 
in towns and cities having a population of one thousand persons 
or more, and where such employees are required to do indoor wO£k 
chiefly, shall provide and keep in a cleanly condition separate 
and distinct toilet rooms for such employees, said toilets to be 
lettered and marked in a distinct manner, so aa to separate the 
white- and colored males and females of both sexes : Provided, 
that the provisions of this section shall not apply to cases where 
toilet arrangements or facilities are furnished by said employer 
off the premises occupied by him. 

C. S., B. 6559; 1913, c. 83, s 1 

177. Location; intruding on toilets misdemeanor. It shall be 
the duty of the persons or corporation mentioned under this 
article to locate their toilets for males and females, white and 
colored, in separate parts of their buildings or grounds, in build- 
ings hereafter erected, and in those now erected all closets shall 
be separated by substantial walls of brick or timber, and any 
employee who shall wilfully intrude or use any toilet not intended 
for his or her sex or color shall be guilty of a misdemeanor and 
upon conviction shall be fined five dollars. 

C. 8., B. 6500; 1913, c. 63, a. 4. 

178. Failure to provide toilets a miademeanor. Any person or 
corporation refusing to comply with the provisions of the second 
preceding section shall be guilty of a misdemeanor, and upon con- 
viction fined five dollars for the first offense and five dollars for 
each day they shall fail to make the provisions required under this 
article. 

C. a, H. 6561; 1913, c. 83, a. 2. 

179. Police in towns to enforoe article. It shall be the duty of 
the police officers of any town or city to investigate the place of 
business of any person or corporation employing males and fe- 
males and see that the provisions of this article are put in force, 
and it shall be their duty to swear out a warrant before the mayor 
or other proper officer of any town or city and prosecute all per- 



North Caeouna Corporation Code 121 

flonB, corporations, and managers of corporations violating an; 
of the provisions of this article. 
C. S., ■. fi662; 1913, e. S3, s. 3. 

180. Sheriff in county to enforce urtiole. Wben any persons or 
corporations locate outside of any city or town, its manufactur- 
ing plant or other business, it shall be the duty of the sheriff of 
the county to make investigation of the condition of the toilets 
used by such manufacturing plant or business and see that the 
provisions of this article are complied with, and it shall be his 
duty to swear out a warrant before a justice of the peace and 
prosecute any one violating the provisions of this article. 
181. Oonnties ^miipted from article. Sections 176, 177, 178, 
179, and 180, of this article shall not apply to Sampson, Harnett, 
Lee, Johnston, Northampton, Cleveland, Rutherford, Polk, and 
Henderson Counties. 

C. 8., 8. 6564; 1913, c. S3, 8. 6. 

182. Oonftmction of buildings regulated. All hotels, lodging 
houses, school dormitories, hospitals or sanitariums hereafter con- 
structed in this state, over two stories in height and over one hun- 
dred feet in length, shall be constructed so that there shall be at 
least two pairs of stairs for the use of guests leading from the 
ground floor to the uppermost story, and for larger buildings such 
number as the proper officials shall designate. Every hotel, lodg- 
ing house, school dormitory, hospital or sanitarium in the state, 
three stories and over in height, shall be provided, without delay, 
with permanent iron balconies with iron stairs leading from one 
balcony to the other, to be placed at the end of each hall above the 
second story, in case such hotel, lodging house, school dormitory, 
hospital or sanitarium is over one hundred and fifty feet in length, 
and in other cases such number as may be directed by the insur- 
ance commissioner or chief of Are department of such city or town 
in which such hotel, lodging house, school dormitory, hospital or 
sanitarium is located. Such balconies and iron stairs are to be 
constructed at the expense of the owner of the building. Where 
hotels, lodging houses, school dormitories, hospitals or sanitariums, 
already built and only three stories in height, are, in the opinion 
of the insurance commissioner, provided with sufficient inner stair- 
ways, so located as to furnish snfScient egress in case of fire, the 
the commissioner may waive the requirement for outside iron 
balconies and stairs. This article shall not apply to private resi- 
dences at which lodgers are not received for hire. 
C. 8., a. 6081 ; 1909, c. 637, a. 1. r- \ 

D,:|,lz.db.CA>03lC 



122 North Cabouna CoRPOBATfON Code 

183. Places ot public umuement, how conBtruoted. Every the- 
ater, opera house, or other like place of puhlie amueeineiit shall 
have Hs many doors for egress therefrom as may be uecessary and 
can be made eonsistently with the proper strength of the boild- 
ing; all such doors shall be hung so as to open outwardly, or both 
outwardly and inwardly; and the seats therein shall be arranged 
in rows properly spaced, with aisles of adequate width, so as to 
afford easy egress therefrom. All scenery shall be made as se- 
cure against becoming inflamed as reasonably practical, and also 
all reasonably practical arrangements shall be made for the con- 
stant supply of water and other means for extinguishment of 
fires, and they shall be kept constantly effective during the pres- 
ence of an audience. The insurance commissioner may require 
all theaters to be equipped with a front curtain of asbestos or 
other fireproof material, to be furnished by owner of the build- 
ing, and this curtain shall be raised and lowered not less than 
twice before each performance, in order to gaaractee its being 
in perfect working order. 

C. S., 8. 6082; 1900, c. 637. b. 2. 

184. DooriB in certain buildings to open outwardly. In all 
public schoolhouses and other buildings, and also all theatres, 
assembly rooms, halle, churches, factories with more than twenty 
employees, and all other buildings or places of public resort where 
people are accustomed to assemble (excepting schoolhouses and 
churches of one room on the ground floor) which shall hereafter 
be erected, together with all those heretofore erected and which 
are stil! in use as sucli buildings or places of resort, the doors for 
ingress and egress shall be so hung as to open outwardly from the 
audience rooms, halls, or workshops of such buildings or places, 
or the doors may be hung on double hinges, so as to open with 
equal ease outwardly or inwardly. 

C. S., B. 6083; 1906, c 637, a. 3. 

186. Fire-escapes to be provided. All factories, manufacturing 
establishments, or workshops of three or more Btories in height, 
in which thirty or more people are employed above the first floor 
thereof, shall be provided with one or (if the proper officials shall 
deem necessary) more outside fire-escapes, not less than six feet 
in lensrth nnd three feet in width, properly and safely constructed, 
guarded by iron railings not less than three feet in length and 
taking in at least one door and one window or two i^indows at 



N(»TH Cakolina Corp(»atu)N Code 128 

eaeh story and connected with the interior by easily accessible 
and unobetmcted openings ; and the fire-escapes shall connect by 
iron stairs not less than twenty-four inches wide, the steps to be 
not less than six inches tread, placed at not more than an angle of 
forty-five degrrees slant, and protected by a well secured hand-rail 
on both sides, with a twelve-inch-wide drop ladder from the low- 
est platform reaching to the ground. No outside fire-escapes shall 
be required where there are already sufficient inside stairways. 
For evwy twenty people employed on any floor above the second 
floor of every factory and workshop there shall be one rope or 
portable fire-escape, and each story shall be amply supplied with 
meaoB for. extinguishing fires. All the main doors, both inside 
and oDtside, in factories, except fire doors, shall open outwardly, 
when the proper official shall so direct, and no outside or inside 
door of any building wherein operatives are employed shall be 
locked, bolted, or otherwise fastened during the hours of labor 
so as to prevent egress. 



186. Ways of escape provided. Every building now or here- 
after used, in whole or in part, as a public building, public or 

private institution, sehoolhouse, church, theater, public hall, place 
of assembly or place of public resort, and every building in which 
twenty or more persons are employed above the second story in a 
factory, workshop, or mercantile or other establishment, when 
the omier or agent of the owner of tlie building is notified in 
writing by the insurance commissioner or one of his deputies, 
shall be provided with proper ways of egress or other means of 
escape from fire sufficient for the use of all persons accommodated, 
assembled, employed, lodging or residing in such building or 
buildings, and such ways of egress and means of escape shall be 
kept free from obstructions, in good repair, and ready for use. 
Every room above the second story in any such building in which 
twenty or more persona are employed shall be provided with 
more than one way of egress by stairways on the inside or out- 
side of the building. All doors in any building subject to the pro- 
visions of this article shall open outwardly, if the insurance com- 
missioner or one of his deputies shall so direct in writing. 



187. Enforcflment by insurance commiuioner. The i 
commissioner is charged with the execution of this law, and he or 
the chief of the fire department is vested with all privileges, 
daties, and obligations placed upon them in this chapter, in re- 

DidilzedbyCoO^IC 



124 North Carolina Corporation Code 

gftrd to the inapectioQ of buildings, for the purpose of enforcing 
the provisions of this article in regard to the buildings and re- 
quirements herein. Any owner or occupant of premises failing 
to comply with the provisions of this article, in accordance with 
the orders of the authorities above specified, shall be guilty of a 
misdemeanor and punished by a fine of not less than ten dollars 
nor more than fifty dollars for each day 's neglect. If any owner 
or lessee of any building referred to in this article shall deem him- 
self aggrieved by any luling or order of any chief of fire, depart- 
ment or local inspector, he may within twenty-four hours appeal 
to the insurance commissioner, and the cause of complaint shall 
at once be investigated by the direction of the commissioner, and 
unless by his authority the order or ruling is revoked it shall re- 
main in full force and effect and be forthwith complied with by 
the owner or lessee. 
C. 8., B. 6086; 1908, e. 837, b. 6. 

AET. 4. HOUES OF SEKVICE FOR EMPLOYEES OP 
CARRIERS. 

188. Maximmn continuous serrice. It shall be unlawful foi 
any common carrier, its ofBcers or agents, subject to this article, 
to require or permit any employee, subject to this article, to be 
or remain on duty for a longer period than sixteen consecutive 
hours, and whenever any such employee of such common carrier 
shall have been continuously on duty for sixteen hours he shall 
be relieved and not required or permitted again to go on duty 
until he has had at least ten consecutive hours off duty ; and no 
such employee who has been on duty sixteen hours in the aggre- 
gate in any twenty-four-hour period shall be required or permitted 
to continue or again go on duty without having had at least eight 
consecutive hours off duty : Provided, that no operator, train dis- 
patcher, or other employee who by the use of the telegraph or 
telephone dispatches, reports, transmits, receives, or delivers 
orders pertaining to or affecting train movements shall be re- 
quired or permitted to be or remain on duty for a period longer 
than nine hours in any twenty-four-hour period in all towers, 
offices, places, and stations continuously operated night and day, 
nor for a longer period than thirteen hours in all towers, ofBces, 
places, and stations operated only during the daytime, except in 
case of emergency, when the employees named in this proviso may 
be permitted to be and remain on duty for four additional hours 
in a twenty-four-hour period or not exceeding three days in any 

DidilzedbyCoOglC 



North Carolina Corpobatiom Code 126 

week; Provided further, the corporation conunisaion may, after 
a full hearing in a particular case and for good cause shown, ex- 
tend the period within which a common carrier shall comply with 
the provisions of this proviso aa to such ease. 
G. S., 9. eS«S; 1911, e. 112, b. Z. 

189. Pmalty for violation. Any such common carrier, or any 
officer or agent thereof, requiring or permitting any employee to 
go, be, or remain on duty in violation of the last preceding sec- 
tion shall be liable to a penalty of not to exceed five hundred 
dollars for each and every violation, to be recovered in suit or 
suits to be brought in the name of the state of North Carolina on 
relation of the corporation commission in the superior court of 
Wake county or of the county in which the violation of this article 
occurred; and it shall be the duty of the said corporation com- 
mission to bring such suits upon satisfactory information lodged 
with it; but no such suit shall be brought after the expiration 
of one year from the date of such violation ; and it shall be the 
duty of the said corporation commiBsion to lodge with the proper 
solicitors information of any -such violations as may come to its 
knowledge. In all prosecutions under this article the common 
carrier shall be deemed to have had knowledge of all acts of all 
its officers and agents : Provided, that the provisions of this article 
shall not apply in any case of casualty or unavoidable accident 
or the act of God ; nor where the delay was the result of a cause 
not known to the carrier or its officer or agent in charge of such 
employee at the time the said employee left a terminal, and which 
could not have been foreseen: Provided further, that the provi- 
sions of this article shall not apply to the crews of wrecking or 
relief trains: Provided further, this article shall not be construed 
to impose a penalty upon any common carrier for any act done 
in violation of the act of congress, ratified March the fourth, one 
thousand nine hundred and seven, and entitled "An act to pro- 
mote the safety of employees and travelers upon railroads by lim- 
iting the hours of service of employees thereon," or any acts 
amendatory thereof. 

C. S., B. 6566; 1»11, e. 112, b. 3. 

190. OorporatioD commission's power. It shall be the duty of 
the corporation commission to execute and enforce the provisions 
of this article, and all powers granted to the corporation commis- 
sion are extended to it in the execution thereof, 

C. S., 8. 6567; 1911, c. 112, «. 4. 

■ DidilzedbyCoO^IC 



126 NOBTH CABOUNA COBFOBATIOM CODE 

ART. 5. EARNINGy OF EMPLOYEES LN' IiNTERSTATE 
COMMERCE. 

1911 OoUdctiens out of state to avoid exemptions forbidden. 
No resident creditor or other holder of any book account, nego- 
tiable instrument, duebill or other monetary demand arising out 
of contract, due by or chargeable against any resident wage- 
earner or other salaried employee of any railway corporation or 
other corporation, firm, or individual engaged in interstate busi- 
ness shall send out of the state, assign, or transfer the same, for 
value or otherwise, with intent to thereby deprive such debtor of 
bia personal earnings and property exempt by law from applica- 
tion to the payment of his debts under the laws of the state of 
North Carolina, by instituting or causing to be instituted thereon 
against such debtor, in any court outside of this state, in such 
creditor's own name or in the name of any other person, any 
action, suit, or proceeding for the attachment or garnishment of 
such debtor's earnings in the hands of his employer, when suen 
creditor and debtor and the railway corporation or other corpo- 
ration, firm, or individual owing the wages or salary intended to 
be reached are under the jurisdiction of the courts of this state. 

C. S., B. 0GG8; 191)9, c. 504, s. 1. 

192. Itesident not to abet collection out of state. No peraoo 
residing or sojourning in this state shall counsel, aid, or abet any 
violation of the provisions of section 6568 {herein 191). 

C .S., 8. 6509: 1909, e. 504, e. 2. 

193. Remedies for violation of two preceding sections ; damages ; 
indicbnent. Any person violating any provision of the last two 
sections shall be answerable in damages to any debtor from 
whom any book account, negotiable instrument, duebill, or other 
monetary demand arising out of contract shall be collected, or 
against whose earnings any warrant of attachment or notice of 
garnishment shall be issued, in violation of the provisions of sec- 
tion 656S (herein 191), to the full amount of the debt thus col- 
lected, attached, or gamisheed, to be recovered by civil action 
in any court of competent jurisdiction in this state; and any per- 
son so offending shall likewise be guilty of a misdemeanor, pun- 
ishable by a fine of not more than two hundred dollars. 

C. a, a. 6570; 1909, c. 504, a. 3. 

194. Institution of foreign suit, etc., evidence of intent to violate. 
In any civil or criminal action instituted in any court of compe- 
tent jurisdiction in this state for any violation of the provisions of 

DiyilzcdbvCoO^IC 



North Carolina Corpoeation Code 127 

sections 6568 and 6569 (hereiu 191 and 192), proof of the institu- 
tion or prosecution of any action, suit, or proceeding in violation 
of the provisions of section 6568 (herein 191), the issuance of serv- 
ice therein of any warrant, attachment, notice or garnishment or 
other like writ for the garnishment o£ earnings of the defendant 
therein, or of the payment by the garnishee therein of any final 
judgment rendered in' any such action, suit, or proceeding shall be 
deemed prima facie evidence of the intent of the creditor or other 
holder of the debt sued upon to deprive such debtor of his per- 
sonal earnings and property exempt from application to the pay- 
ment of his debts under the laws of this state, in violation of the 
provisions of this article. 
C. S., B. 6571; 1909, c. 504, b. 4. 

195. Ootutrnction of article. No provision of this article shall 
be so construed as to deprive any person entitled to its benefits of 
any legal or equitable remedy already possessed under the laws 
of this state. 

C. 8., B. 6572; 1909, e. 504, a. 5. 



sdbyGoOgIc 



CHAPTER III. 
MONOPOLIES' AND TRUSTS. 

Section 

Combinationa in restraint of trade illegal 196 

An^ reatraint in violation of common law ineladed 1S7 

Burden of proof aa to reaBOnablaneaa on defendant 198 

Contiaets to be in writing ■ . . , . IW 

Particular acts deSned 200 

Violation a miademeanor; punialiment 201 

Persona encouraging violation guilty 202 

Continuona violationa aeparate offenses SOS 

Duty of attorney-general to investigate 204 

Power to compel examination 205 

Persons examined exempt from prosecution 206 

Befusal to furnish inf onnation ; fslae swearing 207 

Criminal proaecation; solicitors to aaaist; expenses 808 

Bemedy for civil action 209 

In what name eivil action prosecuted 210 

Oivil action by person injured; treble damagea 211 

196. Combinations in restraint of trade illegal. Every contract, 
eombiQation in the form of trast or otherwise, or conspiracy in 
restraint of trade or commerce in the atate of North Carolina is 
hereby declared to be illegal. Every person or corporation who 
shall make any such contract expressly or shall knowingly be a 
party thereto by implication, or who shall engage in any such 
combination or conspiracy, shall be guilty of a misdemeanor, and 
upon conviction thereof such person shall be fined or imprisoned, 
or both, in the discretion of the court, whether such person entered 
into such contract individually or as an agent representing a cor- 
poration, and such corporation shall be fined in the discretion of 
the court not less than one thousand dollars. 

C. a, s. 2559; 1913, c. 41, a. 1. 

UonopoIiM § 29. A combination by dealers in a necessary of life to raise, 
by agreement, the price thereof is indictable at common law. — State v. 
Craft, 168 N. C. 208, 83 S. E. 772. 

Monopolies § 29. To a conspiracy to raise the prices of neceasariea of life, 
it is no defense that a person, not one of the conspirators, sold the same 
commodity at as high a price as the conapirators had agreed on, or that 
one might think that the price agreed on was reasonable. — Ibid. 

UonopoIlM § SI. On a trial for a conapiracy by milk dealers to raise the 
price, the testimony of a witness that he had heard defendants say, after 
the agreement to raiae the price was signed, that they sold milk thereafter 
at the higher priced agreed on was admissible. — Ibid. 

197. Ai^ resb'aint in violation of oommon law ineladed. Any 

act, contract, combination in the form of trust, or conspiracy in 
restraint of trade or commerce which violates the principles of 

DiclzedbyCoO^IC 



North Cabolina Corporation Code 129 

the common law is hereby declared to be in violation of the pre- 
ceding section of this chapter. 
C. S., s. 2560; 1913, e. 41, 8. 2. 

ISS. Burden of proof as to nasonableness on defendant. All 

contracts, combinations in the form of tniat, and conspiracies in 
restraint of trade or commerce prohibited in the two preceding 
sections of this chapter are hereby declared to be unreasonable 
and illegal, unless the persons entering into such contract, combi- 
nation in the form of trust, or conspiracy in restraint of trade or 
conmierce can show efBrmatively upon an indictment or civil 
action for violation of the preceding sections of this chapter that 
KHch contract, combination in the form of trust, conspiracy in re- 
straint of trade or commerce doea not injure the business of any 
competitor, or prevent any one from becoming a competitor be- 
canse his or its business will be unfairly injured by reason of such 
contract, combination in the form of trust, or conspiracy in re- 
straint of trade or commerce. 
C. S., 8. 2561; 1913, c. 41, s. 3. 

199. Oontracts to be in writing. No contract or agreement 
hereafter made, limiting the rights of any person to do business 
sDywhere in the state of North Carolina shall be enforceable un- 
less snch agreement is in writing duly signed by the party who 
agrees not to enter into any such business within such territory : 
Provided, nothing herein ^all be construed to legalize any con- 
tract or agreement not to enter into business in the state of 
North Carolina, or any point in the state of North Carolina, which 
contract ia now illegal, or which contract is made illegal by any 
other section of this chapter. 

C. 8., 8. 2562; 1913, c. 41, a. 4. 

200. ParticoIoT acta defined. In addition to the matters and 
things hereinbefore declared to be illegal, the following acts are 
declared to be unlawful, that is, for any person, firm, corporation, 
or association directly or indirectly to do or to have any contract, 
express or knowingly implied, to do any of the acts or things 
specified in any of the subsections of this section, 

1. To agree or conspire with any other person, firm, corporation 
or association to put down or keep down the price of any article 
produced in this state by the labor of others, which article the 
person, firm, corporation or association intends, plans or desires 
to buy. 



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ISO North Carolina Corporation Code 

2. To make a sale of any poods, wares, merchandise, articles or 
things of value whatsoever in North Carolina, whether directly 
or indirectly, or through any agent or employee, upon the condi- 
tion that the purchaser thereof shall not deal in the goods, wares, 
merchandise, articles or things of value of a competitor or rival 
in the business of the person, firm, corporation or association 
making such sales. 

3. To willfully destroy or injure, or undertake to destroy or 
injure, the busines of any opponent or business rival in the state 
of North Carolina with the purpose or intention of attempting to 
fix the price of anything of value when the competition is removed. 

4. Who directly or indirectly buys or sells within the state, 
through himself or itself, or through any agent of any kind or 
as agent or principal, or together with or through any allied, snb- 
sidiary or dependent person, firm, corporation or association, any 
article or thing of value which is sold or bought in the state to 
injure or destroy or undertake to injure or destroy the business 
of any rival or opponent, by lowering the price of any article or 
thing of value sold, so low, or by raising the price of any article 
or thing of value bought, so high as to leave an unreasonable or 
inadequate profit for a time, with the purpose of increasing the 
profit on the business when such rival or opponent is driven out 
of business or his or its business is injured. 

5. Who deals in any thing of value within the state of North 
Carolina, to give away or sell, at a place where there is competi- 
tion, such thing of value at a price lower than is charged by such 
person, firm, corporation or association for the same thing at 
another place, where there is not good and sufficient reason, on 
account of transportation or the expense of doing business, for 
charging less at the one place than at the other, with the view of 
injuring the business of another. 

6. Who is engaged in buying or selling any thing of value in 
North Carolina, to make or have any agreement or understanding, 
express or implied, with any other person, firm, corporation or 
association, not to buy or sell such things of value within certain 
territorial limits within the state, with intention of preventing 
competition in selling or to fix the price or prevent competition in 
buying of such things of value within these limits: Provided, 
nothing herein shall be construed to prevent an agent from repre- 
senting more than one principal. But nothing in this proviso 
shall be construed to authorize two or more principals to employ 
a common agent for the purpose of suppressing competition or 



North Carolina Corporation Code 131 

lowering prices: Provided further, that nothing herein shall be 
construed to prevent a person, firm or corporation from selling his 
or its business and good will to a competitor, and agreeing in 
writing not to enter the business in competition with the pur- 
chaser in a limited territory, as is now allowed under the common 
Isw: Provided, such agreement shall not violate the principles of 
thie common law against trusts and shall not violate the provisions 
of this chapter. 
C, S., 9. 2563; 1913, p. 41, b. 5. 

Cantracts g 116. A contract betweeo brothers who to^othor ^■"■'•'') at 
Icaal 80 por cent ot the cotton ginned in thief town of great cotton pro- 
dwing country, whereby one sold to thp other cotton gin, nnd npri-eii not 
to gin cotton on the south side of a certain creek, in eonaideration of the 
other agreeing not to gin cotton on the north side of such ereck, where con- 
tract did not provide for sale of the good will of gin plant, was a divisiou 
of the territory for the purpose of eliminating competition, and hence not 
(Dforeeable, being in restraint of trade. — Shute v. Shute, 176 N. C. 462, 
97 a E. 382. 

Contracta §117. In determining whether contract for sale of a busineas 
ii illegal as in restraint of trade, the contract must be considered as to its 
reasonableness in duration of time, or e.ilent of territorv, largalv in con- 
neotiou with the nature of the business .—Ibid, 

Contracts g 117. Agreement of defendant upon sale of bis fish business 
not tp engage in similar business for ten years within 100 miles held not 
void as an unreasonable restraint of trade. — Morchead City Sea Pood Co. 
V. Way, 169 N. C. 679, 88 3. E. 003. 



Contracts §117. Contracts in partial restraint of trade will be upheld, 
if founded upon valuable consideration, reasonably necessary to protect 
(he interests of the parties, and not prejudicial to the public interests. — 
Mar-Hof Co. v. Bosenbacher, 176 N. C. 330, 97 S. E. 169. 

HonopOlles g 17. When defendant bought largo quantities of goods, and 
■pent a large sum of money in aidvertising them, contract giving defendant 
eiclnsive iaie of goods in city for two years was not prohibited. — Ibid. ■ 

MooopoUea § 17. It is only contracts not reasonable that are prohibited. 
Ibid. 

Contracts g 117. Contracts in restraint of trade are valid when the re- 
straint ia only partial and reasonable, affording fair protection and not in- 
terfering with public interests. — Bradshaw v. Millikin, 173 N. C. 43Z, »i 
8. E. 161. 

201. Violation a misdemeanor; punishment. Any corporation, 

either as agent or principal, violating any of the provisions of 
preceding section shall be guilty of a misdemeanor, and such cor- 
poration shall upon conviction be fined not less than one thousand 
dollars for each and every offense, and any person, whether acting 
for himself or as officer oE any corporation or as agent of any cor- 
poration or person violating any of the provisions of this chapter 

DiyilzcdbvCjOO^^IC 



132 North Carolina Corporation Code 

shall be guilty of a misdemeanor and upon conviction shall be 
fined or 'imprisoned, or both, in the discretion of the court. 
C. S., B. S564; 1913, c. 41, a. 5. 

202. Persons enconrajring violation guilty. Any person, being 
either within or without the state, who encourages or willfully 
allows or permits any agent or associates in business in this state 
to violate any of the provisions of this chapter shall be guilty of 
a misdemeanor, and upon conviction shall be punished as provided 
in the preceding section. 

C. S., B. 2565; 1913, c. 41, a. 6. 

203. Gontinuoiu violatiotu separato offenses. When the things 
prohibited in this chapter are continuous, then in such event, after 
the first violation of any of the provisions hereof, each week that 
the violation of such provision shall continue shall be a separate 
ofiEense. 

C. 8., t. 3566; 1913, c. 41, b. 7. 

204. Duty of attorney-general to investigate. The attorney 
general of the state of North Carolina shall have power, and it 
shall be his duty, to investigate, from time to time, the affairs of 
all corporations doing business in this state, which are or may be 
embraced within the meaning of the statutes of this state defining 
and denouncing trusts and combinations against trade and com- 
merce, or which he shall be of opinion are so embraced, and all 
other corporations in North Carolina doing business in violation 
of law; and all other corporations of every character engaged in 
this state in the business of transporting property or passengers, 
or transmitting messages, and all other public-service corporations 
of any kind or nature whatever which are doing business in the 
state for hire. Such investigation shall be with a view of ascer- 
taining whether the law or any rule of the North Carolina corpo- 
ration commission is being or has been violated by any such cor- 
poration, offieers or agents or employees thereof, and if so, in 
what respect, with the purpose of acquiring such information as 
may be necessary to enable him to prosecute any such corporation, 
its agents, offieers and employees for crime, or prosecute civil 
actions against them if he discovers they are liable and should be 
prosecuted. 

C. S., B. 2567; 1913 c. 41, b. 8. 

206. Power to compel examination. In performing the duty 
required in the preceding section, the attorney-general shall have 

isents or oi 



North Carolina Corporation Code 133 

ployees of any such corporation, and all other persooB havini; 
knowledge with respect to the matters and affairs of such corpora- 
tions, to submit themselves to examination by him, and produce for 
his inspection any of the boohs and papers of any such corpora- 
tions, or which are in any way connected with the business thereof, 
and the attorney-general is hereby given the right to administer 
oath to any person whom he may desire tOrexamine. He shall 
also, if it may become necessary, have a right to apply to any 
judge of the supreme or superior court, after five days notice of 
such application, for an order on any such person or corporation 
he may desire to examine to appear and subject himself or itself 
to such examination, and disobedience of such order shall con- 
stitute contempt, and shall be punishable as in other cases of dis- 
obedience of a proper order of such judge. 
C. B., B. 2568; 1613, o. 41, s. 9. 

206. Person examined exempt from prosecution. No person 
examined, as provided in the preceding section, shall be subject 
to indictment, prosecution, punishment or penalty by reason or 
on account of anything disclosed by him upon such examination, 
and full immunity from prosecution and punishment by reason 
or on account of anything so disclosed is hereby extended to all 
persons so examined. 

C. 8., fl. 2S69; IBIS, c. 41, b. 12. 

307. Befns^ to fnmisb information; false swearing. Any cor- 
poration unlawfully refusing or willfully neglecting to furnish 
the inlformation required by this chapter, when it is demanded 
as herein provided, shall be guilty of a misdemeanor and fined not 
less than one thousand dollars : Provided, that if any corporation 
shall in writing notify the attorney-general that it objects to the 
time or place designated by him for the examination or inspection 
provided for in this chapter, it shall be his duty to apply to a 
judge of the supreme or superior court, who shall fix an appro- 
priate time and place for such examination or inspection, and 
such corporation shall, in such event, be guilty under this section 
. only in the event of its failure, refusal or neglect to appear at 
tbe time and place so fixed by the judge and furnish the informa- 
tion reqiiired by this chapter. False swearing by any person 
examined under the provisions of this chapter shall constitute 
perjury, and the person guilty of it shall be punishable as in other 
cases of perjury. 

C. 8., 8. 2S70; 1913, c. 41, ». 10. 

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134 North Caeolina Corpoeation Code 

208. Oriminal prosecution; solicitors to assist; expenses. The 
attorney -general in carrying out the provisions of this chapter 
shall have a right to send bills of indictment before any grand 
jury in any county in which it is alleged this chapter has been 
violated or in any adjoining county, and may take charge of and 
prosecute all cases coming within the purview of this chapter, and 
shall have the power to cail to his assistance in the performance 
of any of these duties of his office which he may assign to them 
any of the solicitors in the state, who shall, upon being required 
to do so by the attorney-general, send bills of indictment and 
assist him in the performance of the duties of his office : Provided, 
that the state shall pay the actual and necessary expenses of the 
solicitor incurred while performing such duties and not over one 
hundred dollars as an extra fee when the expense account is ap- 
proved by the attorney -genera I and governor and didy audited, 
anjj the amount of the fee is fixed by them. 

The necessary expenses incident to carrying out the provisions 
of this chapter shall, when approved by the governor and audited, 
be paid out of any money in the state treasury not otherwise ap- 
propriated, 

C. S., 8. 2571; 1913, c. 41. 8. 13. 

209. Remedy hj civil action. If it shall become necessary to' do 
80, the attorney-general may prosecute civil actiofis in the name 
of the state on relation of the attorney-general to obtain a man- 
datory order to carry out the provisions of this chapter, and the 
venue shall bo in any county as selected by the attorney-general- 

C, S., a, 2572; 1913, c. 41, s. 11. 

210. In what name civil action prosecuted. It shall be the duty 
of the attorney -general, upon his ascertaining that the laws have 
been violated by any trust or public-service corporation, so as to 
render it liable to prosecution in a civil action, to prosecute such 
action in the name of the state, or any officer or departmenrt 
thereof, as provided by law, or in the name of the state on relation 
of the attorney-general, and to prosecute all officers or agents or 
employees of such corporations, whenever in his opinion the 
interests of the public require it. 

C. a, 8. 3573; 1913, c. 41, b. 12. 

211. Civil action bj person injured; treble damages. If the 
business of any person, firm or corporation shall be broken up, 
destroyed or injured by reason of any act or thing done by any 
other person, firm or corporation in violation of the provisions 
of this chapter, such person, firm or corporation so mjured shall 

DiyilzcdbvCoOglc 



North Carolina Corporation Code 135 

have a right of action on account of such injury done, and if 
damages are asaessed by a jury in such case judgment shall be ren- 
dered in favor of the plaintiff and against ihe defendant for treble 
the amount fixed by the verdict, 

C. S., B. 2574; 1913, c. 41, b. 14. 

Injunction g2S9. Oa defendant's motion for judgment on injimetion 
bond, defendant cannot recover an amount in exceBs of tbe penalty of the 
bond, even though he is eatitled to punitive damages for treble tbe amount 
of actual damages.— Shnto v. Shute, 180 N. C. 386, 104 8. E. 764. 



Dicil zed by Google 



CHAPTER IV. 
BANKS. 

ABT. 1. DETINITIONa. 

Section 

The following defluitious shall be applied to the terms used in thU act ei2 
ABT. 2. CEBATION. 

How incorporated 219 

Certifleats of incorporation; how signed, proved and filed .... 214 

Preliminary eiajninatioii . 215 

Certificate of incorporation, when certified £16 

Payment of capital stock 217 

Statement filed before beginning business 218 

Antborised to begin business 21ft 

Transactions preliminary to beginning business 220 

Increase of capital Btock 221 

Decrease of capital stock 222 

Consolidation of banks 223 

Consolidated banks deemed one bank 224 

Reorganization 225 

ABT. 3. DISSOLUTION AND LIQUIDATION. 

Voluntary liquidation 226 

Corporation commission may take charge, when 2S7 

Involuntary liquidation; receivership 228 

Dividends and unclaimed deposits, disposition of 229 

Receivers, powers and duties of 230 

^ooks, records, etc., disposition of ' 231 

AWf. 4. STOCKHOLDERS. 

Stockholders, individual liability of 232 

Exemption from liability, repealing of 233 

Executors, trnatees, etc., not personally liable 234 

Transferor not liable, when 235 

Stock sold if subscription unpaid >...'... 236 

Impairment of capital; assessment upon stockholders 237 

ART. 5. POWERS AND DUTIES. 

General powers 238 

Investments, limitations of 23ft 

Stocks, limitations on investment in 240 

Loans, limitations of ■ 241 

Investment and loan limitation, suspension of 242 

Reserve 243 

Reserve shall consist of 244 

Forged check, payment of 24fi 

Minor, payment of deposit in name of 246 

Transaction's not performed during banking hours 247 

Commercial and business paper defined 248 

Bank acceptances defined - .... 249 

Nonpayment of check in error, liability for 250 

Checks sent direct to bank on which drawn 251 

Deposits in trust, payment of 25S 

Farm loan bonds, authorized investment in . . . . ^•. . . • . 253 
r,.„z.dbX.003lC 



North Carolina Corporation Code 137 

Se<;tion 

Federft] Beserre Bank, aathoritj to join 254 

Eatabliahment of branches 2S5 

Certificate of deposit, unlawful iseuing of 256 

Bank own stock, unlawful to loan on 25T 

Deposits payable on demand . ■ . • 258 

Deposits In savings banks 259 

Board of directors, banks controlled by 260 

ART. 6. OFFICEBS AND DIRECTORS. 

Executive committee, directors shall appoint 261 

Minntes of directors and executive committee meetings 262 

Directors, qualifications of 263 

Directors shall take oath ■ . . . 264 

Directors, liability of 265 

Directors, examining committee of 266 

Depositaries, designated by directors 267 

Stockholders' book 268 

Directors, officers, etc., accepting fees, etc 269 

Dividends, directors may declare 270 

Snrplns shall not be used for 271 

Overdrafts, payment bj officer, etc 272 

Officers and employees shall give bond 273 

Officers and employees may borrow, when 274 

Oath of corporations as administrator, etc ■ . 275 

ART. 7. CORPORATION COMMISSION. 

Corporation commission shall have supervision over 276 

Reports of condition .277 

Report of condition of trust and surety companies 278 

Special reports ■ 279 

Failure to make report, penalty for 280 

Annual report of stockholders - . . . - . 281 

Official communications of corporation commission 2S2 

Books, records, etc., corporation commission may prescribe .... 283 

Reserve, when below legal requirement 284 

ART.-8. BANK EXAMINERS. 

Bank examiners, appointed by corporation commission 2Su 

Bank examiners, duties and powers 2&9 

Offlcers and employees, removal of 287 

Examiners may administer oath 288 

Examiners may make arrest ■ 289 

Annnal examinations 290 

Examiners shall make report 291 

ART. 9. PENALTIES. 

Examiner making false report 292 

Examiners disclosing confidential information 293 

Bank, unauthorized use of word 2S4 

False reports, willfully and maliciously making 205 

Misapplication, embezzlement of funds, etc 290 

False certification of a cheek 297 

Insolvent banks, receiving deposits in .... ■ 298 

Capital stock, advertising larger amount than that paid in ... . 299 

Offenses against banking law ^ , . Oi^Wq 

General Corporation Law to apply _r,i':iu-.j r.., ^''-jbl^^ 



138 North Carolina Corporation Code 

art. 10. industrial banks. 

Section 

Industrial bank deJlned - . 302 

Manner of organizatiou 303 

Capital Stock 304 

Corporate title 305 

Powere 306 

ReBtrictions on powers 307 

Limit on loans SOS 

Directors 309 

Supervision and eiamioation 310 

Previously organized corporations may qualify 311 

ART. 1. DEFINITIONS. 

212. The following definitiotis shall be applied to the terms 
used in this act: 

The term "bank" when used in this act shall be construed 
to mean any corporation, partnership, firm, or individual receiv- 
ing, soliciting, or accepting money or its equivalent on deposit 
as a biisinesB: Provided, however, this definition shall not be 
construed to include building and loan associations, Morris 
plan companies, industrial banks or trust companies not re- 
ceiving money on deposit. 

The term"surplus" means a fund created pursuant to the 
provisions of this act by a bank from its net earnings ornndivided 
profits which, to the amount specified and any additions thereto 
set apart and designated as such, is not available for the pay- 
ment of dividends, and cannot be used for the payment of ex- 
penses or losses so long as such bank has undivided profits. 

Banks and Banking §41. The primary purpoao of a bank surplus is the 
accumulation of a sum against ivbich bad debts nay be churged, so tli!it at 
all 'times the capital mav be kept unimpaired. Pullcn v. Corporation Com. 
mission, 152 N. C. 548, 68 S. E. 155. 

The term "undivided profits" means the credit balance of the 
profit and loss account of any bank. 

The term "net earnings" means the excess of the gross earn- 
ings of any bank over expenses and losses chargeable against such 
earnings during any dividend period. 

The term "time deposits" means all deposits, the payment of 
which cannot be legally required within thirty days. 

The term "demand deposits" means all deposits, the payment 
of which can be legally required within thirty days. 

The term "insolvency" means: (a) when a bank cannot meet 
its deposit liabilities as they become due in the regular course of 
bu.siness; (b) when the actual cash market value of its assets is 
insufficient to pay its liabilities to depositors and other creditors; 



North Carolina Corporation Code 139 

(c) when its reserve shall fall under the ajuouut required by this 
act, and it shall fail to make- good such reserve withiu thirty days 
after being required to do so by the Corporation Commission. 

1921, c. 4, B. 1. 

ART. 2. CREATION. 

213. How incorporated. Any number of persons, not less 
than five, who may be desirous of forming a company and engag- 
ing in the business of establishing, maintaining, and operating 
banks of discount and deposit to be known as commercial banks, 
or engaging in the busines of establishing, maintaining, and oper- 
ating offices of loan and deposits to be known as savings banks, or 
of establishing, maintaining, and operating banks having depart- 
ments for both classes of business, or operating banks engaged in 
doing a trust, fiduciary, and surety business, shall be incorporated 
in the manner following and in no other way ; that is to say, such 
persons shall, by a certificate of incorporation under their hands 
and seals set forth : 

1. The name of the corporation. No name shall be used 
already in use by another existing corporation organized under 
the laws of this state or of the Congress, or so nearly similar 
thereto as to lead to uneertainity or confusion. 

2. The location of its principal office in this state. 

3. The nature of its business, whether that of a commercial 
bank, savings bank, trust company, or a combination of two or 
more or all of such classes of business. 

4. The amount of its authorized capital stock which shall be 
divided into shares of fifty or one hundred dollars each; the 
amount of capital stock with which it will commence business, 
vvhi'ch shall not be less than fifteen thousand dollarK in cities or. 
towns or three thousand population or less; not less than thirty 
thousand dollars in cities and towns whose population exceeds 
three thousand, but does not exceed ten thousand; nor less than 
fifty thousand dollars in cities and towns whose population ex- 
ceeds ten thousand but does not exceed twenty-five thousand; 
nor less than one hundred thousand dollars in cities and towns 
having a population of more than twenty-five thousand ; the pop- 
ulation to be ascertained by the last preceding National census: 
Provided, that subsection four of section two of this act shall 
not apply to banks organized and doing bu.siness prior to its 
adoption. 

5. The names and postoffiee addresses of subscribers for stock,! 
and the number of shares subscribed by each; the aggregfctfe'^ «f 



140 North Carouna Cobporation Code 

such subscriptions stall be the amount of the capital with which 
the company will commence business. 

6. Period, if any, limited for the duration of the .company. 

1021, c. 4, s. z. 

214. Gertiflcate of incorporation; how signed, proved and 
filed. The certificate of incorporation shall be signed by the 
original incorporators, or a majority of them, and shall be proved 
or acknowledged before an officer duly authorized under the laws 
of this state to take proof or acknowledgment of deeds, and shall 
be filed in the office of the secretary of state. The secretary of 
state shall forthwith tranamit to the corporation commission a 
copy of said certificate of incorporation, and shall not issue or 
record the same until duly authorized so to do by the corporation 
commission as hereinafter provided. 

1931, c. 4, 1. 3. 

215. PrfllimJTHLTy examination. Upon receipt of a copy of 
the certificate of incorporation of the proposed bank, the corpora- 
tion commission shall at once examine into all the facts connected 
with the formation of such proposed corporation, including ita 
location and proposed stockholders, and if it appears that such 
corporation, if formed, will be lawfully entitled to commence the 
business of banking, the corporation commission shall so certify 
to the secretary of state, who shall thereupon issue and record 
such certificate of incorporation. But the corporation commission 
may refuse to so certify to the secretary of state, if upon ex- 
amination and investigation it has reason to believe that the 
proposed corporation is formed for any other than legitimate 
banking business, or that the character, general fitness, and re- 
sponsibility of the persons proposed as stockholders in such corpo- 
ration are not such as to command the confidence of the com- 
munity in which said bank is proposed to be located ; or that the 
public convenience and advantage will not be promoted by its 
establishment, or that the name of the proposed corporation is 
likely to mislead the public as to its character or its purpose; 
or if the proposed name is the same as one alr^dy adopted, or 
appropriated by an existing bank in this state, or so similar 
thereto as to be likely to mislead the public. 

1921, e. 4, a. 4; Ei. Seaaion 1931, c. 56, b. 1. 

216. Certificate of incorporation, when certified. Upon re- 
ceipt of such certificate from the corporation commission, the 
secretary of state shall, if said certificate of incorporation be in 
accordance with law, cause the same to be recorded in his office 



NoBTH Carolina Corporation Cora: 141 

in a book to be kept for that purpose, and known ae the Corpora- 
tion Book, and he shall, upon the payment of the organization 
tax and feee, certify under his official seal two copies of the said 
certificate of incorporation and probates, one of which shall forth- 
with be recorded in the office ot the clerk of the superior court 
of the county where the principal office of said corporation in 
this state shall or ia to he located, in a book to be known as the 
Record of Incorporations, and the other certified copy shall be 
filed in the office of the corporation commission, and thereupon 
the said persons shall be a body politic and corporate under the 
Dame stated in such certificate. The said certificate of incorpora- 
tion, or a copy thereof, duly certified by the secretary of state or 
the clerk of the superior court of the county in which the same 
ia recorded, or by the clerk of the corporation commission, under 
their respective seals, shall be evidence in all courts and places, 
and shall, in all judicial proceedings, be deemed prima facie evi- 
dence of the complete organization and incorporation of the com- 
pany purporting thereby to have been established. The charter 
nf any bank which fails to complete its organization and open for 
business to the public within six months after the date of filing its 
certificate of incorporation with the secretary of state shall be 
void; Provided, however, the corporation commission may for 
cause extend the limitation herein imposed. 

1921, c. 1, 8. 5. 

217. Payment of capital stock. At least fifty per cent of the 
capital stock of every bank shall be paid in cash before it shall he 
authorized to commence business, and the remainder of the capital 
stock of such bank shall be paid in monthly installments of at 
least ten per cent in cash of the whole capital, -payable at the end 
of each succeeding month from the time it shall be authorized by 
the corporation commisision to commence business, and the pay- 
ment of each installment shall be certified to the corporation 
commission, under oath, by the president, or the cashier of the 
bank : Provided, that the stock sold by any hank in process 
of organization, or for an increase of the capital stock, shall be 
accounted for to the bank in the full amount paid for the same. 
No commission or fee shall be paid to any person, association, or 
corporation for selling such stock. The corporation commission 
shall refuse authority to commence business to any bank if com- 
missions or fees have been paid, or have been contracted to be 
paid by it, or by any one in its behalf, to any person, association,, 



142 North Carolina Corporation Code 

or corporation for securing subscriptions for or selling stock in 
such bank. 

1921, c. 4, 8. 6. * 

218. Statement filed before beg^innlDg business. Bcforii such 
company shall begin the business of banking, banking and trust, 
fiduciary, or surety business, there shall be filed with the corpora- 
tion commission a statement under oath by the president or 
cashier, containing the names of all the directors and officers, with 
the date of their election or appointment, term of office, residence, 
and postoffice address of each, the amount of capital stock of 
which each is the owner in good faith and the amount of money 
paid in on account of the capital stock. Nothing shall be received 
in payment of capital stock but money. 

1921, c. 4, a. 7. 

216. Authorized to begin business. Upon filing of such state- 
ment, the corporation commission shall examine into its affairs, 
ascertain especially the amount of money paid in on account of 
its capital. The name and place of residence of each director, 
the amount of capital stock of which each is the owner in good 
faith, and whether such corporation has complied with all thii 
provisions of law required to entitle it to engage iu business. 
If upon such examination it appears to the corporation commis- 
sion that it is lawfully entitled to commence the business of 
banking, banking and trust, fiduciary, or surety business, it shall 
give to such corporation a certificate signed by the ehairman 
of the corporation commission, attested by the secretary of the 
commission, that such corporation has complied with all the pro- 
visions of the law required to be complied with, before commenc- 
ing the business ^^f banking, and that such corporation is nu- 
thorined to commence business. 

220. Transactions preliminary to beginning business. No 
such corporations sliatl transact aiiy business except such as is 
incidental and necessarily preliminary to its organization until it 
has been authorized to do so by the corporation commission. 

1921, r. 4, 5. 9. 

Banks ft Banking § 42. Fuilure of n. bank to organize within two yearn 
nfter it is rhiirtorcd <-iiii onlv be raised bv the state in a direi-t proc^ediug. 
Ro.vd V, Rp<lil, 120 X. C. 335, 27 8. E. 35. 

221. Increase of capital stock. A corporation doing business 

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North Cakolina Coeporation Code 148 

under the provisioiiB of this act may increase its capital stock aa 
provided by law for other corporations. 
1921, t. 4, H. IQ. 

222. Decrease of capital atock. A corporation doing business 
under the provisions of which act may reduce its capital stock in 
the manner provided for other corporations ; Provided, that no 
bank shall reduce its capital stock to an amount leas than the 
minimum required by law. Such reduction shall not be valid or 
warrant the cancellation of stock certificates until it has been ap- 
proved by the corporation commission. Such approval shall not 
be given except upon a finding by the corporation commisaiou 
that the security of existing creditors of the corporation will not 
be impaired. 

1821, c. 4, B. 11. 

223. Consolidation of banks. A bank may consolidate with or 
transfer its assets and liabilities to another bank. Before such 
consolidation or transfer shall become effective, each bank con- 
cerned in such consolidation or transfer shall file, or cause to be 
filed, with the corporation commission, certified copies of all pro- 
ceedings had by its directors and stockholders, which said stock- 
holders' proceedings shall set forth that holders of at least two- 
thirds of the stock voted in the affirmative on the proposition of 
consolidation or transfer. Such stockholders' proceedings shall 
also contain a complete copy of the agreement made and entered 
into between said banks, with reference to such consolidation or 
transfer. Upon the filing of such stockholders' and directors' pro- 
ceedings as aforesaid, the corporation commission shall cause to 
be made an. examination of each bank to determine whether the 
interest of the depositors, creditors, and stockholders of each bank 
are protected, and that such consolidation or transfer is made for 
legitimate purposes, and its consent to or rejection of such con- 
solidation or transfer shall be based upon such examination. No 
such consolidation or transfer shall be made without the consent 
(if the corporation commission. The expense of such examination 
shall be paid by such banks. Notice of such consolidation or 
transfer shall be published for four weeks before or after the 
same is to become effective, at the discretion of the corporation 
commission, in a newspaper published in a city, town, or county 
in which each of said banks is located, and a certified copy thereof 
shall be filed with the corporation commission. In case of either 
transfer or consolidation the rights of creditors shall be preaerved ■ 



144 North Cabolina Corporation Code 

unimpaired, and the respective companiea deemed to be in exiBt- 
ence to preserve such rights for a period of three years. 
1921, c. 4, s. 12. 

224. ConsoUdated banks deemed one bank. In ease of con- 
solidation when the agreement of consolidation is made, and a 
duly certified copy thereof is filed with the secretary of state, 
together with a certified copy of the approval of the corporation 
commission to such consolidation, the banks, parties tliereto, shall 
be held to be one company, possessed of the rights, privileges, 
powers, and franchises of the several companies, but subject to all 
the provisions of law under which it is created. The directors 
and other officers named in the agreement of consolidation shall 
serve until the first annual meeting for election of officers and 
directors, the date for which shall be named in the agreement. 
On filing such agreement, all and singular, the property and 
rights of every kind of the several companies shall thereby be 
transferred and vested in such new company, and be as fully its 
property as they were of the companies parties to the agreement. 

1921, e. 4, B. IS. 

226. Reorganization. Whenever any bank under the laws of 
this state or of the United States is authorized to dissolve, and 
shall have taken the necessary steps to effect dissolution, it sh«ll 
be lawful for a majority of the directors of such bank, upon au- 
thority in writing of the owners of two-thirds of its capital Bt<ick, 
with the approval of tbe corporation commission, to execute arti- 
cles of incorporation as provided in this act, which articles, in 
addition to the requirements of law, shall further set forth tbe 
authority derived from the stockholders of such national bank or 
state hank, and upon filing the same as hereinbefore provided for 
the organization of banks, the same shall become a bank under 
the laws of this state, and thereupon all assets, real and personal, 
of the dissolved national or state bank shall by operation of law 
he vested in and become the property of such state bank, subject 
to all liabilities of such national ot state bank not liquidated 
under the laws of the United States or this state before such 
reorganization. 

1921, c. 4, B. 14. 

ART. 3. DISSOLUTION AND LIQUIDATION. 

226. Volnntary liquidation. A bank may go into voluntary 
liquidation and be closed, and may surrender its charter and fran- 
chise as a corporation of this state by the affirmative vote of its 

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North Carolina Corporation Code 146 

atockholders owQiDg two-tbirds of its stock, sucb vote to be taken 
at a meeting of the Btockholders duly called by resolution ot the 
board of directors, written notice of which, atating the purpose of 
the meeting, shall be mailed to each stockholder, or in case of his 
death, to bis legal representative or heirs at law, addressed to bis 
last known residence ten days previous to the date of said meet- 
ing. Whenever stockholders shall by such vote at a meeting regn- 
larly called for the purpose, notice of which shall be given as 
herein provided, decide to liquidate such bank, a certified copy of 
all proceeding^ of the meeting at which said action shall have 
been taken, verified by the oath of the president and cashier, ahall 
be transmitted to the corporation commission for its approval. 
If the corporation commission shall approve the same, it shall 
issue to the said bank, tinder its seal, a permit for such purpose. 
No such permit shall be issued by the corporation commission un- 
till said commission shall be satisfied that provision has been made 
by such bank to satisfy and pay off all depositors and all creditors 
of such bank. If not so satisfied, the corporation commission 
shall refuse to issue a permit, and shall be authorized to take pos- 
session of said bank and its assets and business, and hold the same 
and liquidate said bank in the manner provided in this act. When 
the corporation commission shall approve the voluntary liquida- 
tion of a bank, the directors of said hank shall cause to be pub- 
lished in a newspaper in the city, town, or county in which such 
bank is located, a notice that the bank is closing up its affairs 
and going into liquidation, and notify its depositors and creditors 
to present their claims for payment. When any bank shall be in 
process of voluntary liquidation, it shall be subject to examina- 
tion by the corporation commission, and shall furnish such re- 
ports from time to time as may be called for by the corporation 
commission. All unclaimed deposits and dividends remaining in 
the hands of such bank shall be subject to the provisions of this 
act as hereinafter provided. 

1821, c. 4, a. 15. 

227. Corporation commission may take chaxge, when. The 
corporation commission may forthwith take possession of the 
business and property of any bank to which this act is applicable 
whenever it shall appear that such bank : 

1. Has violated its charter or any laws applicable thereto; 

2. Is conducting its business in an unauthorized or unsafe 
manner ; 

3. Is in an unsafe or unsound condition to transact its business; 

4. Has an impairment of its capital stock; ^ - , 

.HZ^dbX-OO^IC 



146 North Carouna Corporation Cois 

5. Has refused to pay its depositors in accordance with tbe 
terms on which such deposits were received; 

6. Has become otherwise insolvent; 

7. Has neglected or refused to comply with the terms of a duly 
issued lawful order of the corporation commission ; 

8. Has refused, upon proper demand, to submit its records, 
affairs, and concerns for inspection and examination to a duly- 
appointed or authorized examiner of the corporation commission ; 

9. Its officers have refused to be examined upon oath regard- 
ing its affairs. 

Such banks may, with the consent of the corporation commis- 
sion, resume business upon such terms and conditions as may be 
approved by it, 

1921, 0. 4, B. 16. 

228. ]ji7oluiitaT7 liqtiidation, recelTership. If any bank shall 
neglect or refuse for a period of sixty days to make a report to 
the corporation eoramission, aa it may demand, or shall fail, neg- 
lect, or refuse to comply with the provisions of the section oext 
preceding this one, or if at any time the corporation commission 
shall find a bank, or other institution subject to its supervision 
in an insolvent condition, or if such institution shall neglect or 
refuse to correct any irregularities through violation of this act, 
which may be called to the attention of the president, cashier, or 
board of directors, the corporation commission shall have au- 
thority to take charge of such institution, and if upon investiga- 
tion it appears to be to the interest of creditors, depositors, and 
stockholders that a receiver should he appointed, it may apply to 
the court for the appointment of a competent person as receiver. 
Any receiver so appointed, before entering upon his duties, shall 
execute a good and sufficient bond in some bonding company au- 
thorized to do business in North Carolina, which bond shall be 
approved by the court. Such receiver, under the direction of 
the court, shall take possession of the books, moneys, records, and 
assets of every description of such institution, and collect all 
debts, dues and claims belonging to it, and npon order of the 
court may sell or compound all bad or doubtful debts, and on like 
orders may sell all real and personal properties belonging to audi 
bank and upon such terras, as the court may approve or direct, 
and, if necessary to pay its debts, the receiver may enforce the 
individual liabilities of its stockholders. A suit for such purpose 
may he instituted ai^ainst resident stockholders in the name of 
such receiver in the superior court of the county in which its bank- 
- ing office or home is located, and as to nonresident stockholders, 

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North Caholina Corporation Code 147 

the suit may be brought in any county of any state, where such 
stockholder resides, or where service of a process may be had on 
such stockholder. All expenses on account of any receivership 
and all wages or salaries due officers or employees shall be paid 
out of the assets of such bank before distribution of the proceeds 
thereof; and such receiver may, on order of the court, make a 
ratable dividend of the money in his hands on all such claims as 
may have been proved to his satisfaction or adjudication in a 
court of competent jurisdiction, and as the proceeds of the assets 
of such bank are paid to the receiver, he shall on like orders make 
any further dividends, upon all claims previously proved or ad- 
judicated, and the remainder of the proceeds, if any, shall he paid 
to the stockholders of such hank, or their legal representatives, 
in proportion to the stock respectively held by thera. Any hank 
which 18 being operated or liquidated under any receivership 
herein provided shall remain subject to examination and supervi- 
sion by the corporation commission. 

1921, e. 4, a. 17. 

Bonks ft BanktOB g77. An applirntion for th<- appoiiitmciit ft n rprcivcr 
call be ma<lc to the rusideat judge, or the judge holdinf; the t-ourts by 
aBsignment or by exthODge, of the judi«iul district in which the bank 
is situated. Worth v. Piedmont Brink of Morgnnton, 121 X. (L 343, 38 
S. E. 488. 

Banks ft Banking §77. Vodt-r former statute giving Stnte Treumirer the 
eiclusive right to institute proceediugs for a receiver, auy creditor still 
had the right to begin an' nction for that iiurpose in the superior court of 
the county where the bank is situated.— Ibid. 

Banks ft Banking g 77. The Court which first takes pogn inn tire of tho 
controversy is entitled to retain juriedirtion until the end of the litigation, 
to the exclasion of all iuterferentc by other courts of concurrent jnriwlic- 
tion; and where ]>erniHnent receivers were apimiuted iu Bcpariite proceedings 
by different courts having equal authority to appoint, the test of jurisdic- 
tion is not the first issuing of the summons, nor the tlrst preparation .and 
■verification of the papers, nor which receiver first took posseasion, but 
whicL court was first "seised of jurisdiction," by making an order upon 
legal proceedings ejthihited before it, as by the appointnieut of n tempo- 
rary receiver. — Ibid. 

BSAJcfl ft Banking g 77. Where a rei-eivor of u bank has been appointed 
at the instance of creditors, an action cannot be maintained a^niiist him 
to recover a deposit; the remedv heing bv a petition in the receivership. 
Crulchfleld v. Hunter, 138 N. C. 54, .>0 8. K. 557. 

Banks ft Banking §77. Where a resident creditor of an insolvent bank 
brings suit in anothi-r state, which hinders the collection of the assets of 
the bank by the receiver, the receiver is entitled (o enjoin the creditor for 
the prosecution of such suit; and it is no defense that such receiver had an 
adequate remedv at law. Davis v. Butters. Lumber Co., 132 N. C. 233, 43 8. 
v.. 630. 



for the~J>enefit|0( 
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148 NOBTH GABOLINA CORPORATION CODE 

creditors. Smathers v. Western Carolina Bank, 135 N. C. 410, 47 S. £. 
883. 

Banks A Banking § 1S6. Upon a bank, closing its doors, all claims against 
and. in favor of it become due at once. Davis v. Industrial Mfg. Co., 114 
N. C. 321, 19 S. E. 371. 

229. Dividends and unclaimed deposits, dispoBition of. Divi- 
dends and unclaimed deposits remaining in the hands of the re- 
ceiver for a period of six months after the order for final dis- 
tribution by the court shall be deposited with the state treasurer, 
who shall hold such funds as custodian without the payment of 
interest, subject to the order of the court appointing the receiver, 
and without the necessity of appropriation by the general assem- 
bly. Any person entitled to all or any part of such unclaimed divi- 
dends or deposits may apply to the court of the county in which 
insolvent bank was located, or had its principal office, for an 
order directing the state treasurer to pay such dividends or un- 
claimed deposits. Upon satisfactory proof of such claim, it shall 
be the duty of the court to issue such an order upon the state 
treasurer, directing the payment of said dividend or unclaimed 
deposit, and the state treasurer is by this act authorized, em- 
powered and directed to pay out such moneys, without interest, 
as stated in the order of the court herein authorized to issue such 
orders. ' 

1931, c. 4, s. 18. 

230. Receivers, powers and duties of. That article ten of the 
Consolidated Statutes, relating to receivers, when not inconsist- 
ent with the provisions of this act, shall apply to receivers ap- 
pointed hereunder. 

1921, c. 4, a. 1». 

231. Books, records, etc., disposition of. All books, papers, 
and records of a bank which has been finally liquidated shall be 
deposited by the receiver in the office of the clerk of the superior 
court for the county in which the office of such bank is located or 
in such other place as in his judgment will provide for the proper 
safe-keeping and protection of such books, papers, and records. 
The books, papers, and records herein referred to shall be held 
subject to the orders of the corporation commission and the clerk 
of the superior court for the county in which sueh bank was 
located. 

1931, c. 4, a. 20. 

ART. 4. STOCKHOLDERS. 

232. Stockholders, individual liability of. The stockholders 

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North Cakolina Coeporation Code 149 

of every bank organized iinder the laws of Ntftth Carolina, 
whether under the general law or by special act, shall be individ- 
ually responsible, equally and ratably, and not one for another, 
for all contracts, debts, and engagements of such corporation, to 
the extent of the amount of their stocks therein at par value 
hereof, in addition to the amount invested in such shares. The 
term stockholders, when used in this act, shall apply not only to 
such) persons as appear by the books of the corporation to be 
stoekholders, but also to every owner of stock, legal or equitable, 
although the same may be on such books in the name of another 
person ; but shall not apply to a person who may hold the stock 
as collateral for the payment of a debt. 

1981, c. 4, H. SI. 

Budcs ft BanUng 847. The individufil liability, created by statute, of 
the Bhareholders in a Danh, beyond the amount of tho stock for which they 
have Bobaeribed, Is an amet of the corporation available only to the cced- 
itora and depoeitora of the bank. Hill v. Smathers, 173 N. C. 642, 92 3. B. 
607. 

Banks ft Banlcllis g 47. This provision of law creates an additional lia- 
bility npon the BtockliiiDlderB aa a matter of statute, and not by eontiaeti and 
when a woman owna such stock in her own name itnd right, the liability 
being statntorj and for the benefit of the bank's creditors and not arising 
by contract, she is equally liable under such law. Smathers v. Western 
Carolina Bank, 1S5 N. C. 283, 71 S. E. 345. 

Banks ft Banking g 47. A receiver for an insolvent bank is the proper 
party to bring an action against tho stockholders to enforce their double 
liability. Smathers v. Western Carolina Bank, 135 N. C. 410, 47 S. E. 
803. Details of procedure for enforcing double liability of au insolvent 
b«nk.~Ibid. 

233. Exemption from liability, repealing of. Any exemption 
from the individual liability imposed upon stockholders by the 
preceding section contained in the charter of any bank incorpo- 
rated prior to the first day of January, one thousand nine hun- 
dred and five is repealed. 

1921, e. 4, s. 22. 

234. Execntors, tmsteeB, etc., not personally liable. Persons 
holding stock as executors, administrators, guardians, or trustees 
shall not personally be subject to any liabilities as stockholders, 
but the estate and funds in their hand shall be liable in like 
manner and to the same extent as the testator, intestate, ward, 
or person interested in such trust fund would be if living and 
corapeteut to hold stock in his own name. 

1921, c. 4, s. 23, 

236. Transferor, not liable when. No person who has in good 
faith, and without intent to evade his liability as a stockholder, 

DidilzedbyCoO^IC 



160 NoBTH Cabolina Coeporation Code 

transferred his stock on the books of the corporation to any per- 
son of full age, previous to any default in the payment of any 
debt or liability of the corporation, shall be subject to any per- 
sonal liability on account of the nonpayment of such debt or 
liability of the corporation, but the transferee of any stock so 
transferred previous to any default shall be liable for any such 
debt or liability of the corporation to the extent of such stock, in 
the same manner, as if he had been such owner at the time the 
corporation contracted such debt or liability : Provided, that no 
transfer of the shares of stock of an insolvent state bank, made 
within sixty days prior to its suspension, shall operate tci release 
or discharge the assignor thereof, but shall be prima facie evi- 
dence that such stockholder assigned the same with knowledge of 
the ifisolvency of such bank and with an intent to evade the lia- 
bility thereon. 
1921, e. 4. 8. 24. 

236. Stock sold if subscription unpaid. Whenever any stock- 
holder, or his asignee, fails to pay any installment on the stock, 
when the same is required by law to be paid, the directors of the 
bank shall sell the stock of such delinquent stockholder at public 
or private sale, as they may deem best, having first given the de- 
linquent stockholder twenty days notice, personally or by mail, 
at his last known address. If no party can be found who will pay 
for such stock the amount due thereon to the bank with any ad- 
ditional indebtedness of such .stockholder to the bank, the amount 
previously paid shall be forfeited to the bank, and such sti>ck 
shall be sold, as the directors may order, within thirty days of 
the time of such forfeiture, and if not sold, it shall be canceled and 
deducted from the capital stock of the bank. 

Ex. Seasion 1921, e. C6, i. 8. 

237. Impairment of capital ; assessment upon stockholders. The 
corporation commission shall notify every bank whose capital 
shall have become impaired from losses or any other cause and the 
surplus and undivided profits of such bank are insufficient to 
make good such impairment, to make the impairment good within 
sixty days of such notice by an assessment upon the stockholders 
thereof, and it shall be the duty of the officers and directors of 
the bank receiving such notice tci immediately call a special meet- 
ing of the stockholders for the purpose of making as assessment 
upon its stockholders sufficient to cover the impairment of the 
capital, payable in cash, at which meeting such assessment shall 
be made. Provided, that such bank raay reduce its capital to the 



NoBTH Carolina Cobpoeation Code 151 

extent of the impairment, as provided in chapter 4, section 11, 
Jaws 1921 (222). If any stockholder of such bank neglects or 
refuses to pay such assessment as herein provided, it shall be the 
duty of the board of directors to cause a sufficient amount of the 
capital ■fetoek of such stockholder or stockholders to be sold at 
public auction, upon thirty days notice given by posting such 
notice of sale in the ofBce of the bank and publishing such notice 
iu a newspaper in the place where the bank is located, and if 
none, then iu a newspaper circulating in the county in which the 
bank is located, to make good the deficiency, and the balance, 
if any, shall be returned to the delinquent shareholder or share- 
holders. If any such bank shall fail to cause to be paid in such 
deficiency in its capital stock for three months after receiving 
such notice from the corporation commission, the corporation 
commission may forthwith take possession of the property and 
business of such bank until its affairs be finally liquidated as pro- 
vided by law. A sale of stock, as provided in this section, shall 
eflfeet an absolute cancellation of the outstanding certificate, or 
certificates, evidencing the stock so sold, and make the certificate 
null and void, and a new certificate shall be issued by the bank to 
the purchaser of such stock. 
Ex. Session 1921, c. 66, S. 3. 

ART. 5. POWERS AND DUTIES. 

238. General powws. In addition to the powers conferred 
by law upon private corporations, banks shall have the power: 

1. The exercise by its board of directors, or duly authorized 
officers and agents, subject to law, all such powers as shall be 
necessary to carry on the business of banking, by discounting and 
negotiating promissory notes, drafts, bills of exchange, and other 
evidences of indebtedness, by receiving deposits, by buying and 
selling exchange, coin, and bullion, by loaning money on personal 
security or real and personal property. Such corporations at the 
time of making loans or discount may take and receive interest 
or discounts in advance. 

2. To adopt regulations for the government of the corporation 
not inconsistent with the constitution and laws of this state. 

3. To purchase, hold, and convey real estate for the following 
purposes : 

(a) Such as shall be necessary' for the convenient transaction 
of its business, including furniture and fixtures, with its banking 
offices and other apartments to rent as a source of income, which 



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162 NOBTH CABOUNA COBFORATION CODE 

investmeut shall not exceed fifty per cent of its paid-in capital 
Htock and permanent surplus: Provided, that this provision shall 
not apply to any such investment made before the ninth day of 
March, one thousand nine hundred and twenty-one. 

(b) Such as is mortgaged to it in good faith by way of security 
for loans made or moneys due to such bank. 

(e) Such as has been purchased at sales upon foreclosures of 
mortgages owned by it, or on judgments or decrees obtained and 
rendered for debts due to it, or in settlements effecting seomity 
of such debts. All real property referred to in this subsection 
shall be sold by such bank within one year after it is acquired, 
unless, upon application by the board of directors, the corporation 
commission extends the time within which such sale shall be 
made. Any and all powers and privileges heretofore granted and 
given to any person, firm, or corporation doing a banking business 
in connection with a fiduciary and insurance business, or the right 
to deal to any extent in real estate, inconsistent with this act, are 
hereby repealed. 

1921, e. 4, s. 26. 

239. Investments, limitations of. The investment in any bonds 
or other interest bearing securities of any one firm, individual 
or corporation, unless it be the interest bearing obligations of 
the United States, State of North Carolina, city, town, town- 
ship, county, school district, or other political subdivision of the 
State of North Carolina shall at no time be more than twenty-five 
per cent of the capital and permanent surplus of any bank having 
a paid-in capital of two hundred and fifty thousand dollars or 
less; not more than twenty per cent of the capital and permanent 
surplus of any bank having a paid-in capital of more than two 
hundred and fifty thousand dollars, but not more than five 
hundred thousand dollars; not more than fifteen per cent of the 
capital and permanent surplus of any bank having a paid-in 
capital of more than five hundred thousand dollars, but not more 
than seven hundred and fifty thousand dollars; and not more than 
ten per cent of the capital and permanent surplus of any bank 
having a paid-in capital of more than seven hundred and fifty 
thousand dollars: Provided, that nothing in this section shall 
prevent the investing by a bank of fifty per cent of its capital and 
permanent surplus in the stock or bonds of a corporation owning 
the land, building or buildings occupied by such bank as its bank- 
ing home: Provided further, nothing in this section shall be <"on- 
strued to compel any bank to surrender or dispose of any invest- 

DidilzedbyCoO^Ie 



NoBTH Carolina Coeporation Code 163 

ments in the stocks or bonds of a corporation owning the lands 
or buildings occupied by such bank as its banking home, provided 
such stocks or bonds were lawfully acquired prior to the ratifica- 
tion of this act. 
1921, c. 4. B. 27. 

240. Stocks, limitations on inyestment in. No bank shall make 
any investment in the capital stock of any other state or national 
bank : Provided, that nothing herein shall be construed to pre- 
vent the subscribing to or purchasing of the capital stock of 
banks organized under that act of Congress commonly known as 
the "Edge Act" ; or central reserve banks, having a capital stock 
of more than one million dollars; by banks doing business under 
this act, upon such terms as may be agreed upon. To constitute a 
central reserve bank as contemplated by this act, at least fifty 
per cent of the capital stock of such bank shall be owned by other 
banks. The investment of any bank in the capital stock of such 
central reserve bank or bank organized under that act of Con- 
gress commonly known as the "Edge Act," shall at no time ex- 
ceed ten per cent of the paid-in capital and permanent surplus of 
the bank making same. No bank shall invest more than fifty per 
cent of its permanent surplus in the stocks of other corporations, 
firms, partnerships, or companies, unless such stock is purchased 
to protect the bank from loss. Any stocks owned or hereafter 
acquired in excess of the limitations herein imposed shall be dis- 
posed of at public or private sale within six months after the date 
of acquiring the same, and if not so disposed of they shall be 
charged to profit and loss account, and no longer carried on the 
books as an asset. The limit of time in which said stocks shall be 
disposed of or charged off the books of the bank may be extended 
by the corporation commission, if in its judgment it is for the 
best interest of the bank that such extension be granted. 

1921, c. i, s. 28. 

241. Loons, limitations of. The total direct and indirect lia- 
bilities of any person, firm, or corporation, other than municipal 
corporations, for money borrowed, including in the liabilities of a 
firm the liabilities of the several members thereof, shall at no time 
exceed twenty-five per cent of the capital stock and permanent 
sttrplus of any bank having a paid-in capital of two hundred and 
fifty thousand dollars or less ; not more than twenty per cent of 
the capital and permanent surplus of any bank having a paid-in 
capital of more than two hunderd and fifty thousand dollars, but 
not more than five hundred thousand dollars ; not more than fifteen 



154 North Caeolina Coeporation Code 

per rent of the capital and permanent aurplua of any bank having 
a paid-in capital of more than five hundred thousand dollars, but 
not more than seven hundred and fifty thousand dollars; and not 
more than ten per cent of the capital and permanent surplus of 
any bank having a paid-in capital of more than seven hundred and 
fifty thousand dollars: Provided, however, that the discount of 
bills of exchange drawn in good faith against actually existing 
values, the discount of trade acceptances or other commercial 
paper actually owned by the person, firm or corporation negotiat- 
ing the same, and the purchase of any notes secured by not less 
than a like face amount of bonds of the United States or State of 
North Carolina, or certificates of indebtedness of the United 
States, shall not be considered as money borrowed within the 
meaning of this section: Provided further, that the limitations 
upon loans herein imposed shall not apply to existing loans or 
extensions and renewals thereof, except as same may be made to 
apply by general or special regulations of the corporation com- 



242. Investment and loan limitation, suspension of. The board 
of directors on any bank may, by resolution duly passed at a 
meeting of the board, request the corporation commission to 
temporarily suspend the limitation on loans and investments as 
same may apply to any particular loan or investment, which said 
bank desires to make in excess of the pro%'iBions of sections twenty- 
seven, twenty-eight, and twenty-nine of this act. Upon receipt 
of a duly certified copy of such resolution, the corporation com- 
mission may, in its discretion, suspend the limitation on loans and 
investments in so far as it would apply to the loan or investment 
which such bank desires to make. 

1921, p. 4, B. 30. 

243. Reserve. Every bank shall at all times have on hand 
or on deposit with approved reserved depositories, instantly avail- 
able funds in an amount equal to at least fifteen per cent of the 
aggregate amount of its demand deposits, and five per cent of the 
aggregate amount of its time deposits. But no reserve shall be 
required on deposits secured by a deposit of United States bonds 
or the bonds of the State of North Carolina. Any bank that is 
now or may hereafter become a member of the Federal Reserve 
Bank shall maintain the same reserve with respect to deposits as 
shall be required of other members of such Federal Reserve Bank. 



sdbyCoO^Ic 



North Cahohna Corporation Code 155 

244. Beserve shall coiuist of. ' Reserve shall consist of cash 
oil hand and balances payable on demand, due from other ap- 
proved solvent banks, which have been designated depositories 
as hereinafter provided in this act. 

- 1921, c. 4, B. 32. 

245. Forged check, paTment of. No bank shall be liable to 
a depositor for payment by it of a forged check or other order 
to pay- money unless within sixty days after the receipt of such 
voucher by the depositor he shall notify the bank that such cheek 
or order so paid is forged. 

1921, e. 4, 8. 33. 

Batiks b BanUug gHO. — A baok is liable foe paying a tht-rk drawn to 
the order of one whoae name was signed to a forged trust deed upon tbe 
indorsement of tbe payee's name by a ruatomer known, to the bank, who 
was unnathorized to make such iudorBement, HcKaughan v. Merchants' 
Bnnk & Trust Co., 183 X. C 543, 109 8. E. 355. 

Banks b Banking § 125. A bank, as between itself and the bona Sdo 
holder of n cheek, ia bound to know the signature of its cuatomcra, and 
cannot recover from such holder money paid to him on the subsequent dis- 
covery that the drawer's name was forged; hence if a depositor presents 
a check which he holds in good faith, drawn on the bank by another depos- 
itor, and the check is credited to him in his account and charged to the 
drawer, thai is in effect a payment which the bank cannot repudiate. — 
Woodward v. Savings & Trust Co., ITS N. C. 184, 100 S. E. 304. 

Banks & Banking g 148. A bank with which a person has a deposit ns- 
Bumcs responsibility for the erroneous payment of any check not drawn 
or authorized by the depositor. — Bank of Brunswick v. Thompson, 174 N. C. 
349, 93 S. £. S49. 

Banks ft Banking g 149. Plaintiff bank, paying forged check purporting 
to be signed by its depositor, cashed in good faith by defendant bank, 
held not entitled to recover amount from defendant bank, since it was 
bound to know the signature of its depositors. — State Bank v. Cumberland 
Savings & Trust Co., 168 N. C, 605, 85 S. E. 5. 

246. Minor, payment of deposit in the name of. That when, 
ever any person who is a minor of the age of fifteea years and 
upwards shall make a deposit in any state or national bank in 
this state, the same shall be held for the exclusive benefit and 
right of such minor, free from the control of all persons whatso- 
ever, and it shall be paid, together with the interest, if there be 
any interest thereon, to the person in whose name the deposit 
shall be made, and the receipt, check, or quittance of such minor 
to the said state or national bank shall be valid and sufGcient 
release and discharge for such deposit, or any part thereof, to the 
bank in which said deposit was made. 

1921, c. 4, s. 34. 

347. TransactionB not performed during banking hours. 
Nothing in any law of this state sliall in any manner whatsoever 

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156 NOBTH CAKOLINA CORPORATION CODE 

affect the validity of, or render void or voidable, the payment, 
certification, or acceptance of a cheek or other neg:otiabte instru- 
ment or any other transaction by a bank in this state, because 
done or performed during any time other than regular banking 
hours; Provided, that nothing herein shall be construed to com- 
pel any bank in this state, which by law or custom is entitled to 
close at twelve noon on any Saturday, or for the whole or part 
day of any legal holiday, to keep open for the transaction of 
business, or to perform any of the acts or transactions aforesaid 
on any Saturday after such hour or on any legal holiday, except 
at its option. 
1921, c. 4, 8. 35. 

248. Gommercial ajid buBineas paper defined. The term "com- 
mereial or business paper," as used in this act, is hereby defined 
to mean a promissory note, and the term "trade acceptance" 
to mean a draft or bill of exchange issued or drawn for agri- 
cultural, industrial, or commercial purposes, or the proceeds of 
which have been used or are to be used for such purposes, but 
such definition shall not include notes, drafts, or bills of exchange 
covering merely investments, or issued or drawn for the purpose 
of carrying on or trading in stocks, bonds, or other investment 
securities, except bonds and notea of the Government of the 
United States and State of North Carolina. Such notes, drafts, 
and bills of exchange shall have a maturity at the time of discount 
of not more than ninety days, except when drawn or issued for 
agricultural purposes, or based on livestock, when such maturities 
shall not exceed nine months from the date thereof. 

1921, e. 4, 8. 36. 

2til. Bonk acceptances defined. Any hank doing business 
under this act may accept for payment at a future date, drafts or 
bills of exchange having not more than six months sight to run, 
drawn upon it by its customers under acceptance agreements, and 
which grow out of transactions involving the importation or ex- 
portation of goods; and issue letters of credit authorizing the 
holders thereof, to draw upon it or its correspondence, provided 
that there is a definite bona fide contract for the shipment of goods 
within a specified reasonable time, and the existence of such 
contract is certified in the acceptance agreement; or which grow 
out of transactions involving the domestic shipment of goods, 
provided that shipping documents, conveying or securing to the 
accepting bank title to readily marketable goods, are attached or 

DidilzedbyCoO^^IC 



KoBTH Carolina Corporation Code 157 

in the hands of an agent of the accepting bank, independent of the 
drawer, for his account, at the time of acceptance, or which are 
secured at the time of acceptaQce by warehouse receipts or other 
documents conveying or securing to the accepting hank title to 
readily marketable goods fully covered by insurance, the ware- 
house receipts or other documents to be those of a responsible 
warehouse, independent of the drawer, the acceptance to remain 
secured during the life of the acceptance unless suitable security 
of same character, or cash, be substituted : Provided, no bank 
shall accept drafts or bills of exchange under this section to an 
aggregate amount at any time more than eqnal to the sum of its 
capital and permanent surplus: Provided further, that no bank 
shall accept, whether in a foreign or domestic transaction, for any 
one person, firm, or corporation, to any amount at any time equal 
to more than twenty-five per cent of its capital and permanent 
surplus, unless the accepting bank is secured either by attached 
documents or those held by its account by its agent, independent 
of the drawer, or by some other actual security of the same 
character. Should the accepting bank purchase or discount its 
own acceptances, such acceptances will be considered as a direct 
loan to the drawer, and be subject to the limitation on loans here- 
inbefore provided. The corporation commission may issue such 
further regulations as to such acceptances as it may deem neces- 
sary in comformity with this act. As used herein, the word 
"goods" shall be construed to mean and include goods, wares, 
merchandise, or agricultural products, including livestock. 

1921, c. 4, H. 37. 

Bulks A BanJtins §98. An acceptance, whieh ia an "iuland bill of ex- 
change," but which may be treated as bill or note at the holder's option, 
the drawer and drawee being the same person, is within the charter power 
of a bank dealing in bills, notes, or any and all negotiable or commercial 
papers. Sherrill v. American Trust Co., 176 N. C. 591, 97 S. E, 471. 

260. Nonpayment of check in error, liability for. No bank 
shall be liable to a depositor because of the nonpayment, through 
mistake or errffr,' and without malice, of a check which should 
have been paid had the mistake or error of nonpayment not oc- 
curred, except for the actual damage by reason of such nonpay- 
ment that the depositor shall prove, and in such event the liability 
shall not exceed the amount of damage so proven. 

1931, e. 4, B. 38. 

Bulks A Baaklng g 166. in an action against a bank upon which a check 
had .been drawn, and to whieh it had been sent for collection before " 
drawer was discovered to be insolvent, plaintiff has the burden of pro\ 
that the check was received in sufBeient time for it to have been paid 

DitiilzedbyV. 



a cuecH I 

fore the 
proving 
paid out 

,ooglc 



168 North Carolina Cobporation Come 

of funds of the drawer od deposit. Staudard Trust Co. v. Commercial Nat: 
Bank, 166-X. C. 112, 81 S. E. 1074. 

Banks & Banking §155. In an action againxt a bank upon which a, checlc 
had been drawn, and to which it had beeij sent for payment before the 
drawer was discovered to be insolvent, or the bank had set oB its own claiiD 
against the drawer's deposit evidence held to raise a question (or the 
jury as to the bank's implied acceptance of the check by reason of its 
failure to use due diligence in collection. — Ibid. 

Banks ft Banking g 148. A bank with which a person has a deposit as- 
sumes responsibility for the erroneous payment of any check not drawn or 
authorized by the depoaitor. — Bank of Brunswick v. Thompson, 174 N. C, 
349, 93 S. E. S49. 

251. Checks sent direct to bank on which drawn. Any bank 
receiving for collection or deposit any check, note, or other nego- 
tiable instrument drawn upon or payable at another bank, located 
in another town or city, whether within or without this state, 
may forward snch instrument for collection, direct to the bank on 
which it is drawn, or at which it is payable, and such method of 
forwarding direct to the payer bank shall be deemed due diligence, 
and the failure of such payer bank, because of its insolvency or 
other default, to account for the proceeds thereof, shall not render 
the forwarding bank liable therefor; Provided, however, such 
forwarding bank shall have used due diligence in other respects in 
connection with the collection of such instrument. 

1921, c. 4. s. 39. 



252. Deposits in trust, payment of. Whenever any deposits 
shall be made in any bank or banking institution in this state by 
any person in trust for any other person who is a minor of the age 
of fifteen years and upward, and no other or further notice of the 
existence and terms of a legal and valid trust shall have been 
given to the bank, in the event of the death of the trustee, the 
same, or any part thereof, together with the dividends or interest 
thereon, may be paid to the person for whom said deposit was 
made: Provided, that the amount of said deposit-is not in excess 
of one hundred dollars. 

1921, c. 4, B. 40. 

253. Farm loan bonds, anthorized investment in. Any bank 
or insurance company organized under the laws of this state, and 
any person acting as executor, administrator, guardian, or trustee, 
may invest in federal farm loan bonds issued by any federal 
farm loan bank or joint-stock land bank organized pursuant to an 
act entitled "an act of Congress to provide capital for agricultural 

DiyilzcdbvCoO^IC 



NOBTH CjUWUNa Corporation Code 159 

development, to fjreate standard forms of investment based upon 
farm mortgages, to equalize rates of interest upon farm loans, to 
furnish a market for United States bonds, to create government 
depositaries, and financial agents for the United States, and for 
other purposes," approved the seventeenth day of July, one thou- 
sand nine hundred and sixteen. 

1921, c. 4, a. 41. 

2M. Federal reserve bank, authority to join. The words 
"Federal Reserve Act," as herein used, shall be held to mean and 
to include the act of Congress of the United States, approved 
December twenty-third, nineteen hundred and thirteen, as hereto- 
fore and hereafter amended. The words "Federal Reserve Board" 
shall be held to mean the federal reserve board created and 
described in the federal reserve act. The words "Federal Re- 
serve Banks" shall be held to mean federal reserve banks created 
and organized under the authority of the federal reserve act. 
The words "member bank" shall be held to mean any national or 
state bank or bank and trust company which has become or which 
becomes a member of one of the federal reserve banks created 
by the federal reserve act. 

(a) That any bank incorporated under the laws of this state 
shall have the power to subscribe to the capital stock and become 
a member of a federal reserve bank. 

(b) That any bank incorporated under the laws of this state 
which is, or which may become, a member of the federal reserve 
bank is by this act vested with all powers conferred upon mem- 
ber banks of the federal reserve banks by terms of the federal 
reserve act as fully and completely as if such powers were specifi- 
cally enumerated and described therein, and such powers shall be 
exercised subject to all restrictions and limitations imposed by the 
federal reserve act, or by regulations of the federal reserve 
board made pursuant thereto. The right, however, is expressly 
reserved to revoke or to amend the powers herein conferred. 

(c) A compliance on the part of any such bank with the reserve 
requirements of the federal reserve act shall be held to be a full 
compliance with the provisions of the laws of this state, which 
require banks to maintain cash balances in their vaults or with 
other banks, and no such bank shall be required to carry or main- 
tain reserve other than such as is required under the terms of the 
federal reserve act. 

(d) Any such bank shall continue to be subject to the supervi- 
sion and examination required by the laws of this state, except 
that the federal reserve board shall have the right, if it- deems 



160 North Carouna Corporation Code 

necessary, to make examiiiationB ; and the authorities of this state 
having supervision over such banks may disclose to the federal 
reserve board, or to the examiners duly appointed by it, all in- 
formation in reference to the affairs of any bank which baa be- 
come, or desires to become, a member of a federal reserve bank. 

1921, e. i, B. 42. 

256. EstabliBhrnent of brajichea. Any bank doing business 
under this act may establish branches in the cities in which tfaey 
are located, or elsewhere, after having first obtained the written 
approval of the corporation commission, which approval may be 
given or withheld by the corporation commission, in its discretion, 
and shall not be given until it shall have ascertained to its satis- 
faction that the public convenience and advantage will be pro- 
moted by the opening of such branch. Such branch banks shall 
be operated as branches of and under the name of the parent bank, 
and under the control and direction of the board of directors and 
executive officers of said parent bank. The board of directors 
of the parent bank shall elect a cashier and such other officers 
as may be required to properly conduct the business of such 
branch, and a board of managers or loan committee shall be re- 
sponsible for the conduct and management of said branch, but not 
of the parent bank or of any branch save that of which they are 
officers, managers, or committee: Provided, that the corporation 
commission shall not authorize the establishment of any branch, 
the paid-in capital stock of whose parent bank is not sufficient in 
an amount to provide for the capital of at least fifteen thousand 
dollars for the parent bank, and at least fifteen thousand dollars 
for each branch which it is proposed to establish in cities or towns 
of three thousand population or less ; nor less than thirty thousand 
dollars in cities and towns whose population exceeds three thou- 
sand, but does not exceed ten thousand ; nor less than fifty thou- 
sand dollars in cities and towns whose population exceeds ten 
thousand, but does not exceed twenty-five thousand ; nor less than 
one hundred thousand dollars in cities and towns whose popula- 
tion exceeds twenty-five thousand. All banks operating branches 
prior to the passage of this act shall, within a time limit to be 
prescribed by the corporation commission, cause said branch 
bank to conform to the provisions of this section. 

1921, e. 4, s. 43; Ex. Seuion, 1921, c. 56, b. 2. 

Banks h BuiklDj; §26. Whether a banking company, chartered to do 
buBinesB in a certain place and -without express authority to establish and 
conduct a branch at another place, can do so, is a'matter for the state, 
through the attorney general, to have determined by an action to vacate 
its charter. Morehead Banking Co. v. Tate, 122 N. C. 313, 30 8. E. 341. 



NORTB CaBOLINA CORPORATION CODE 161 

Bankfl ft Bankiiig 1 80. Where authority is given by the legislature to 
eatabliih brancheB, the relation batweeu the parent bank and the branch 
bank waa that o( principal and agent. Worth v. Bank ot New Hanover, 
122 N. C. 397, 29 S. E. 775. 

2B6. Certificate of deposit, unlawful Issning of. It shall be 
unlawful for any bank to issue any certificate of deposit or 
other negotiable instrument of its indebtedness to the holder 
thereof except for lawful money of the United States, checks, 
drafts, or bills of exchange which are the actual equivalent of 
such money; nor shall such moneys, checks, drafts, or bills of 
exchange be the proceeds of any note given in payment o£ the 
purchase price of any stock. Any officer or employee of any bank 
violating the provisions of this section shall be guilty of a misde- 
meanor, and upon conviction thereof shall be fined or imprisoned, 
or both, in the discretion of the court. 

1921, c. 4, H. 44. 

257. Bank own stock, unlawful to loan on. It shall be un- 
lawful for any bank to make any loan secured by the pledge 
of its own shares of stock, nor shall any bank be the holder as 
pledgee, or as purchaser, of any portion of its capital stock unless 
such stock is purchased or pledged to it to prevent loss upon a 
debt previously contracted in good faith. 

1921, c. 4, s. 45. 

Banks * Banldng §260. A stockholder in a national bank in the procesa 
of liquidation cannot set off his diatribntive share in the aaaeta against hia 
liabilities on his stock. First Nat. Bank v. Biggins, 124 N. C. 534, 32 
8. E. 801. 

Boyd V. Bedd, 120 N. C. 335, 27 8. E. 35. 

258. Deposits payable on demand. Any bank may receive 
deposits of funds subject to withdrawal or to be paid upon the 
checks of the depositor. All deposits in such banks shall be 
payable on demand, without notice, except when the contract of 
deposit shall otherwise provide. 

1921, e. 4, a. 46. 

Banks k Bsuklng g 119. The relation 
between a bank and its depositor. Reid ^ 
99, 74 8. E. 746. 

Banks ft Banking g 131. Where a wife directed her husband to deposit 
•SOO of her money in a bank, to be used in a mutual business venture, and 
the husband fraudnlently deposited the money in his own name and sub' 
aeqnetitly withdrew it, and the bank made the payment not withatan ding 
notiQcation by the wife that the money waa hers and that attachment 
•papers were being prepared to recover it, the bank was linble to the wife. 
Miller v. Bank of Waahingfon, 176 N. C. 152, 96 8. E. 977. 

Banks ft Banking gl34. A bank may apply a deposit standing in the^i 



162 North Carolina Corporation Code 

name of plaintiff's wife BgRinBt h debt due it from lier liasband, nbere the 
deposit wBs mnile in the wife's uuine to defraud creditors. Moore v. Green- 
Wile Bunking '& Trust Co., 173 N. C. 180, 91 S. E. 793. 

Banks & Banking § 131. A bank 'g right to apply a deposit in payment of 
« debt is rpfcrnble to priutiples of equity, as well ns statutorv set-off provi- 
Bions,— Ibiit. 

, Banks ft Banking %lbi. Where iu action against depositor on uate he 
pieaded deposit as eounter-elaim, bauk held to have burden of showing pay- 
ment of the deposit on proper orders of the depositor. Ban1t of Brunswiek 
V, Thompson, 174 N. C, 349, 93 S. E. 849. 

Banks ft Banking g 164. The burden is on a bank, sued for a deposit by 
the depositor or Ma reproaontative, to ahow excuse for failure to pay over. 
Churchwell v. Branch Banking & Truat Co., 181 N. C. 21, 105 S. E. 889. 

Banks ft Banking §82. A bank depositor, on rumors of its insolvency, 
went to withdraw hia depoaita, but waa informed by the vice president 
and director that the bank was perfectly aoivent, and that "we have got 
all the money you want. You need never have any fears of this bank as 
long as I am in it." Such depositor, relying on such repreaentationa, permit- 
ted his deposits to remain. The bank was in fact insolvent when the rep- 
resentations were made. Held, that such vice president and director was 
personally liable to such depositor for the money lost by the failure of the 
bank. Townsend v. Williams, 117 N. C. 330, 23 S. E. 461. 

Banks ft Banking g 5S. A single depositor may maintain in hia own be- 
half alone an action against tlie directors of a bank for the loaa of a de- 
posit, caused by their fraud, neglect, and miamanagement. Tate v. Bates, 
118 N. C. 287, 24 S. E. 4S2. 

Banks ft Banking gSS. An action- can be brought by a depositor or other 
creditor of a bank, and eveu by a stockholder, against the president and di- 
rectors for breach of duty, without having first applied to the corporation 
or its receiver to bring snch action, and the request having been refused. 
Solomon v. Bates, 118 N. C. 311, 24 8. K. 478. 

2S8. Deposits in savings banks. Any bank conducting a 
savings department raay receive deposits on such terras as are 
anthnrized by its board of directors and agreed to by its depos- 
itors. The board of directors shall prescribe the terms upon which 
such deposits shall be received and paid out, and a passbook shall 
be issued to each depositor containing the rules and regulations 
adopted by the board of directors governing such deposits, in 
which shall be entered each deposit made, the interest allowed 
thereon, and each payment made to such depositor. By accepting 
such book the depositor assents and agrees to the rules and regula- 
tions therein contained. 

1921, c. 4, s. 47. 

260. Board of directors, banks controlled hj. The corporate 
powor.s, business, and property of banks doing business under 
this act shall be exercised, conducted, and controlled by its board 
of directors, which shall nieeS at least quarterly. Such board 
shall consist of not less than five directors, to be chosen by the 

DidilizedbyCoO^I-C 



North Carouna Corporation Code 168 

stockholders, and shall hold office for one year, and until their 
successors are elected and qualified. 
1921, e. i, B. 48. 

ART. 6. OFFICERS AND DmBCTORS. 

261. Executive committee, directors shall appoint. The board 
of directors shall appoint an executive committee or committees, 
each of which shall be composed of at least three of its mem- 
bers with such duties and powers as are defined by the regu- 
lations or by laws, who shall serve until their successors are 
appointed. Such executive committee or committees shall meet 
as often as the board of directors may require, which shall not be 
less frequently than once each month, and approve or disapprove 
all loans and investments. All loans and investments shall be 
made under such rules and regulations as the board of directors 
may prescribe. 

l»2l, c. 4, B. 4». 

282. Mioates of direotors and executive committee meetings. 
Minutes shall be kept of all meetings of the board of directors and 
of the executive committee or committees, and same shall be re- 
corded in a book or books which shall be kept for that purpose: 
which book or books shall be kept on file in the bank. Such 
minutes shall show a record of the action taken by the board of 
directors and executive committee or committees, on all loans, 
discounts, and investments made, authorized or approved, and 
such further action as the board of directors and executive com- 
mittee or committees shall make concerning the conduct, manage- 
ment, and welfare of the bank. The minutes of the executive 
committee or committees shall be submitted to the board of direc- 
tors for approval at each meeting of the board. 

1921, e. 4, B. 50. 

263. Directors, qtialiflcations of. Every director of a bank 
doing business under this act shall he the owner and holder of 
shares of stock in the bank having a par value of not less than 
five hundred dollars: Provided, such bank shall have a capital 
stock of more than fifteen thousand dollars, and not less than two 
hundred dollars if sucb bank shall have a capital stock of fifteen 
thousand dollars or less. And every such director shall bold such 
shares in his own name unpledged and unencumbered in any way. 
The ofBce of any director at any time violating any of the pro- 
visions of this section shall immediately become vacant, and the 
remaining directors shall decla1*e his ofRce vacant and proceed to 

DidilzedbyCoO^IC 



164 North Carolina Corporation Code 

fill such vacancy forthwith. Not less than three-fourths of the 
directors of every bank doing business under this act shall be 
residents of the state of North Carolina: Provided, that as to 
banks doing business before the ratification of this act the re- 
quirements as to amount of stock owned by a director shall not 
apply unless the corporation commission shall rule that such 
director is not bona fide discharging his duties. 

1621, c. 4, 6. 51. 

264. Directors shall take oath. Every director shall, within 
thirty days after his election, take and subscribe, in duplicate, an 
oath that he will diligently and honestly perform his duties in 
such office ; and that he is the owner in good faith of the shares 
of stock of the bank required to qualify him for such office, stand- 
ing in his own name on its books, and one of such oaths shall 
forthwith be filed with the corporation commission, and the other 
shall be kept on file in the bank. 

1921, c. 4, B. 52. 

26B. Directors, liability of. Any director of any bank who 
shall knowingly violate, or who shall knowingly permit to be 
violated by any officers, agents, or employees of such bank, any of 
the provisions of this act shall be held personally and individually 
liable for all damages which the bank, its stockholders or any 
other person shall have sustained in consequence of such violation. 

1921, c. 4, a. 53. 

B&nks fe Banking § 82. A bank depositor, on rumors of its iiisolven<!}', 
went to withdraw his deposits, but w&s informed by the vice president 
anil director that the bank was perfectly solvent, and that "we have got 
all the money you want. You need never have any tears of this bank aa 
long as T am in it," Soeh depositor, relying od snch representations, pet- 
mitted his deposits to remain. Tbc bank was in fact insolvent when the 
representations were made. Hold, that such vice president and director was 
personally Hablo to such depositor for the money lost by the failure of the 
bank. Townscnd v. Williams, 117 N. C. 330, 23 8. E. 401. 

Banks b Banking % 82, Bank directors, who, by false and fraudulent 

■ ■ . ^- -^ ^ . .-- -- .. - ■■■■ n of (|,g bank, in order 



to conceal its insolvency, induce him not only to make new deposits of the 
state's money, but also to permit a portion of the money deposited by hia 
predecessor to remain, are liable to such treasurer for any loss, either of 
the old or new deposits.— Tate v. Bates, 118 N. C. 287, 24 S. E. 482. 

Banks & Banking §64. It ia the duty of the directors to know the rou- 
dition of their bank, and to prevent publication of false statements of its 
condition, and by no private arrangement could they be excused from giv- 
ing proper attention to such duties because they are nonresidents of the 
town wherein their bank is located. Houston v. Thornton, 122 N. C. 3135, 
29 S. E. 827. 



DiyilzcdbvCoO^IC 



NoKTH Carolina Corporation Code 166 

tending through a period of several years, rained the bank, and during 
which time false itatementB were published showing the bank to be in a 
good condition, the fact that the directors resided away from the town 
where the bank was located will not warrant the assumptiou that such 
directors could not, in the proper discharge of their duty, have ascertained 
that sneh atatementg were false. — Ibid. 

Banks b BAnklng g 82. A romplaiut charging bank directors with frand 
and deceit in making false statements i>f the bank's solvency need not 
allege that defendant knew or believed the bank to be insolvent, such 
knowledge being conclusively presumed. — Tate v. Bates, IIS N. C. 2S7, 24 
S. E. 482. 

Bulks It Banking g56. Where negligence of directors in permitting a 
false and fraadnlent statement of the condition of a bank is the basis 
of an action against the directors, the plaintiff's right to recover should 
not be restricted to one instance of negligence, where there are many others 
in evidence.— Houston v. Thornton, 122 N. C. 365, 29 8. E. 827. 

Bulks h Banking g 112. Where a cashier of a bank disconnts a note 
and converts parts of the proceeds to his own credit instead of the credit of 
the maker, the bank is liable. Phillips v. Hensley, ITS N. C 23, 94 S. E. 673. 

266. Directors, ezamining committee of. A committee of at 
least three directors or stockholders shall be appointed atmually 
to examine, or to superintend the examination of the assets and 
the liabilities of the bank, and to report to the board of directors 
the result of such examination. The committee, with the approval 
of the board of directors, may provide for such examination by a 
certified public accountant or clearing-house examiner in any city 
where such examination is provided for by the rules of such 
clearing-house association, A copy of such report of examination, 
which is herein required to be made, attested, and verified under 
oath by the signature of at least three members of such committee, 
shall forthwith be filed with the corporation commission. 

1921, c. 4, s. 54. 

267. Depositaries, designated by directors. By resolution of 
the board of directors, other banks organized under the laws 
of this state, or of another state, or of the National Banking Act 
of the United States, shall be designated as depositaries or re-serve 
banks in which a part of such bank's reserve shall be deposited, 
subject to payment on demand. A copy of such resolution shall, 
upon its adoption, be forthwith certified to the corporation com- 
mission and the depositary so designated shall be subject to the 
approval of the corporation commission. For causes which it may 
deem adequate, the corporation commission shall have authority 
at any time to withdraw such approval, 

1921, c. 4, s. SS. 

268. Stockholders' book. The directors shall provide a book 
in which shall be kept the name and resident address of each 

DidilzedbyCoO^IC 



166 North Carolina Corporation Code 

stockholder, the iiuinbei' of shares held by each, the time wheu 
such person became a stockholder, together with all transfer of 
stock, stating the time when made, the number of shares and by 
whom transferred, which book shall be subject to the inspection 
of the directors, officers, and stockholders of the bank at all times 
during the usual hours for the transaction of business. 
1921, c. 4, B. 50. 

26S. Directors, officers, etc., accepting fees, etc. No gift, fee, 
permission, or brokerage charge shall be received, directly or 
indirectly, by any officer, director, or employee of any bank doing 
business under this act, on account of any transaction to which 
the bank is a party. Any officer, director, employee, or agent who 
shall violate the provisions of this section shall be guilty of a 
misdemeanor, and shall be and thereafter remain ineligible as an 
officer, director, or employee of any bank doing business under 
this act. Nothing in this section shall be construed to prevent 
the payment of necessary and proper attorney's fees to any 
licensed attorney for professional services rendered, 

1921, e. 4, B, 57, 

270. Dlvidenda, directors may declare. The board of directors 
of any bank may declare a dividend of so much of its undivided 
profits as they may deem expedient, subject to the requirements, 
hereinafter provided. Before such dividend is declared, not 
less than twenty-five per cent of the undivided profits of any 
bank, having a capital stock of fifteen thousand dollars or more, 
shall be carried to the surplus of such bank until its surplus 
amounts to fifty per cent of its paid-in capital stock ; and not less 
than fifty per cent of the undivided profits of any bank having a 
capital stock of less than fifteen thousand dollars shall be carried 
to the surplus of such bank until its surplus amounts to one hun- 
dred per cent of its paid-in capital stock. In order to ascertain 
the undivided profits from which such dividend may be made, 
there shall be charged and deducted from the actual profits: 

(a) All ordinary and extraordinary expenses, paid or incurred, 
in managing the affairs and transacting the business of the bank; 

(h) Interest paid or then due on debts whicli it owes; 

(c) All taxes due; 

(d) All overdrafts which have been standing on the books of 
the bank for a period of sixty days or longer ; 

DiclzedbyCoOglC 



North Cabouna Corporation Code 167 

(e) All losses sustained by the bank. In computing the losses, 
debts owing to it which have become due and which are not in 
process of collection, and on which interest for one year or more 
is due and unpaid, unless same arc well secured, and debts upon 
which final judgment has been recovered, but has been for more 
than one year unsatisfied, and on which also for a period of one 
year no interest has been paid, unless sanie are well secured, shall 
be included. 
1921, T. 4, s. 58. 

271. Surplus, shall sot be used for. The surplus of any bank 
doing business under this act shall not be used for the pur- 
pose of paying expenses or losses until the credit to undivided 
profits has been exhausted. But any portion of such surplus may 
be converted into capital stock and distributed as a stock divi- 
dend, provided that such surplus shall not thereby be reduced 
below fifty per cent of the paid-in capital of such bank, having a 
paid-in capital of fifteen thousand dollars or more. When the sur- 
plus of any bank having a capital stock of less than fifteen thon- - 
sand dollars shall reach an amount equal to one hundred per cent 
of its paid-in capital, the board of directors of such bank shall 
declare a dividend of fifty per cent of said surplus and distribute 
the same as a stock dividend: Provided, that where the distribu- 
tion of such a stock dividend would increase the capital stock of 
any bank to an amount greater than fifteen thousand dollars, the 
board of directors of sueh bank may, in its discretion, declare a 
stock dividend of only so much of said surplus as will be necessary 
to increase the stock of the said bank to fifteen thousand dollars. 

1921, c. 4, s. S9. 

272. Overdrafts, payment by officer, etc. Any officer (other 
than a director), or employee of a bank, who shall permit any 
customer or other person to overdraw his account, or who shall 
pay any check or draft, the paying of which shall overdraw any 
account, unless the same shall be authorized by the board of 
directors or by a committee of such board authorized to act, shall 
be personally and individually liable to such bank for the amount 
of such overdrafts. 

1921, c. 4, 8. 60. 

273. Officers and employees shall give bond. The active 
ofiicers and employees of any hank, before entering upon their 
duties, shall give bond to the bank in a bonding company author- 
ized to do business in North Carolina in the amount to be required 
by the directors, in such form as may be prescribed or approved i 



168 North Cabolina Corpobation Code 

by the corporation commiBsioD. The corporation commission, or ' 
directors of suoh bank, may require an increase of the amount of 
such bond whenever they may deem it necessary. If injured by 
the breach of any bond given hereunder, the bank bo injured by 
the breach may put the same in suit and recover such damages as 
it may have sustained. 

1921, c. 4, B. 61; Ex. Seaalon 1B21, c. 18. 

274. Officers and employees may borrow, when. No officer 
who is actively engaged in the management of any bank, or any 
employee, shall borrow any amount whatever from said bank by 
whom employed, except upon good collateral, or other ample 
security or endorsement; and no such loan shall be made until 
after it has been approved by a majority of the directors or a 
committe of the board of directors authorized to act. 

1921, c. 4, 8. 62. 

275. Oaths of corporations. In all cases where a corporation is 
appointed administrator, executor, collector, or to any other 
fiduciary position, of which fiduciary an oath is required by law, 
such oath may be taken by such corporation by and through any 
officer or agent of said corporation who is authorized by law to 
verify pleadings in behalf of such corporation ; and any oath so 
taken shall be valid as the oath of such corporation. Any oath 
heretofore taken in the manner aforesaid in behalf of a corpora- 
tion as such fiduciary is hereby validated as the oath of such 
corporation. 

C. S., B. 3192; 1919, c. 89, bb. 1, 2. 

ART. 7. CORPORATION COMMISSION. 

276. Corporation commission shall have supervision over, etc 
Every bank, corporation, partnership, firm, company, or indivi- 
dual now or hereafter transacting the business of banking, or 
doing a banking business in connection with any other business, 
under the laws of and within this state, shall be subject to the 
provisions of this act, and shall be under the supervision of the 
corporation commission. The corporation commission shall exer- 
cise control of and supervision over the banks doing business 
under this act, and it shall be its duty to execute and enforce 
through the chief state bank examiner, ihe state bank examiners, 
and such other agents as are now or may hereafter be created or 
appointed, all laws which are now or may hereafter be enacted 
relating to banks as defined in this act. For the more complete 
and thorough enforcement of the provisions of thiK iict, ,the[ corpo- 



North Cabolina Corporation Code 169 

ration commission is hereby empowered to promulgate such rules, 
regulations, and instructions, not inconsistent with the provisions 
of this act, as may in its opinion be necessary to carry out the 
provisions of the laws relating to banks and banking as herein 
defined, and as may be further necessary to insure auch safe and 
conservative management of the banks under its supervision aa 
will provide adequate protection for the intrests of the depositors, 
creditors, stoekholders, aud public in their relations with auch 
banks. All banks doing business under the provisions of this act 
shall conduct their business in a manner consistent with all laws 
relating to banks and banking, aud all rules, regulations, and 
instructions that may be promulgated or issued by the corporation 
commission. 



277. Reports of oonditdon. Every bank shall make to the cor- 
poration commission not less than four reports during each year, 
according to the form which may be prescribed by said com- 
mission; which report shall be verified by the oath or affirma- 
tion of the president, vice president, cashier, secretary, or treas- 
urer of said bank, and in addition thereto, two of the directors, in 
the ease of incorporated banks, and in other eases by the oath or 
affirmation of the partners, members of the firm, or individual 
owner. Each such report shall exhibit in detail and under appro- 
priate heads the resources, assets, and liabilities of such bank at 
the close of business on any past day by the corporation commis- 
sion specified, and shall be transmitted to the corporation com- 
mission within ten days after the receipt of a request or requisi- 
tion therefor from the commission; and in a form prescribed by 
the corporation commission ; a summary of such report shall be 
published in a newspaper published in the place where the hank is 
located, or if there is no newspaper in the place, then in the near- 
est one published thereto in the county in which such bank is 
established. Proof of sueb publication shall be furnished the 
corporation commission in such form as may be prescribed by it. 
1921, c. 4, B. 64. 

Banks A Banking g 82. A bank depoaitor, an rumori of its insolvency, 
went to withdr&w bis deposits, but was ioformed by the vice president 
and director that the bank was perfectly solvent, and that "we have got 
all the money you nant. You need never have any fears of this bank aa 
long as I am in it." Such depositor, relying on such representations, per- 
mitted bis deposits to remain. The bank was in fact insolvent when the 
representations were made. Ilatd, that such vice president and director 
waa personally liable to euch depositor for the money lost by the failure 
of the bank.— Townsend v. Williams, 117 N. C. 330, 23 S. E. *81., | . (^~00o[c 



170 NoKTH Carolina Corporation Code 

Banks It Bankli^ § 82. Bauk directora, who, by false and fraudulent 
BtatementB to the state treasurer as to tbe condition of the baiik, in order 
to conceal its insolvency, induce him not only to make new deposits of tha 
state's money, but also to permit a portion of the money deposited by his 
predecessor to remain, are liable to such treasurer for any loss, eitlier of the 
old or new deposits.— Tate v. Bates, 118 N. C. 287, 2* S. E. 482. 

Banks A Banking g 82. A complaint charging bank directors with fraud 
and deceit in making false statements of the bank's solvency need not 
allege (hat defendant knew or believed the bank to be insolvent, such 
knowledge being conclusively presumed. — Ibid. 

Banks fe Banking g 54. It is the duty of tbe directors to know the con. 
ditiOD of tiieir bank, and to prevent publication of false stateuients of its 
condition, and by no private arrangement could they be excused from giv- 
ing proper attention to such duties because they are nonresidents of the 
town wherein their bank is located.— Houston v. Thornton, 122 N. C. 369, 
29 S. E. 827. 

B&ttks ft Banking g S4. Where it appears that tbe afTairs of a bank were 
left in tho mitnagenient of officers thereof, who, by gross' frauds extending 
through a period of several years, ruined the bank, and during which time 
false statements were published showing the bank to be in a good condi- 
tion, the fact that the directors resided away from the town where the 
bank was located will not warrant the assumption that such directors could 
not, iu the proper discharge of their duty, have ascertained that such 
statements were false. — Ibid. 

Banks h Banking g 55. Where negligence of directors in permitting a 
false and fraudulent statement of the condition of a bank is the baais of 
an action against the directors, the plaintiff's right to recover should not 
be restricted to one instance of negligence, where there are many others \n 
evidence. — Ibid. 

278. Reports of condition of trust and surety companies. 
Every person, firm, corporation, or partnership doing a banking 
business, or a banking business in connection with any other busi- 
ness, shall make to the corporation commission not less than four 
reports during each year, showing the entire amount of trust, 
surety, fiduciary, and guaranty business as a part of the liabilities 
of said banking institution, which reports shall be published as 
are the reports of other banking institutions. If any person, firm, 
corporation, or copartnership shall show by said reports, or by the 
examination of any state bank examiner, that such liabilities are 
equal to the amount of the capital stock of such bank, the corpo- 
ration commission shall have authority, and is hereby empowered 
to make such rules and regulations for the reduction of said 
liabilities as it may deem necessary for the protection of the 
creditors and depositors of such banking institution. 

1921, c. 4, s. 6o. 

279. Special reports. The corporation commission may call 
for special reports whenever in its judgment it is necessary to 
inform it of the condition of any bank, or to obtain a full and 



North Carolina Corporation Code 171 

complete knowledge of its affairs. Said reports shall be in and 
according to the form prescribed by the corporation commission, 
and shall be verified in the manner provided in aection sixty-four 
of thiB act, and shall be published as therein provided, if required 
by the commission so to be, 
im, c. i, B. 66. 

280. Failure to make report, penalty for. Every bank fail- 
ing to make and transmit any report which the corporation com- 
mission is authorized to require by this act, and in and according 
to the form prescribed by said commission, within ten days after 
the receipt of a request or requisition therefor, or failing to pub- 
lish the reports as required, shall forthwith be notified by the 
corporation commission, and if such failure continue for five days 
ifter the receipt of such notice, such delinquent bank shall be 
Bubjeet to a penalty of two hundred dollars. The penalty herein 
provided for shall be recovered in a civil action in any court of 
competent jurisdiction, and it shall be the duty of the attorney- 
geaeral to prosecute aU such actions. 

I9E1, e, 4, ■. 67. 

281. Annual report of stockbolders. Every bank doing busi- 
ness under this act shall at all times keep a correct record of 
the names of all its stockholders, and once in each year, or when- 
ever called upon, file in the office of the corporation commission a 
correct list of all its stockholders, the resident address of each, 
and the number of shares held by each. 

1921, c. 4, s. 68. 

282. Official commanicationB of corporfttion commisaion. Each 
official communication directed by the corporation commission, 
or any state bank examiner, to any bank, or to any officer thereof, 
relating to an examination or investigation conducted or made 
by the banking department of the corporation commission, or 
eontaiaing suggestions or recommendations as to the en duct 
of the bank shall, if required by the authority submitting same, 
be submitted by the officer or director receiving it, to the executive 
committee or board of directors of such bank and duly noted in 
the minutes of such meeting. The receipt and submission of such 
notice to the executive committee or board of directors shall be 
certified to the corporation commission within such time as it 
may require, by three members of such committee or board. 

1921, p. 4, s. 69. 

283. Books, records, etc., corporation commission may prescribe. 
Whenever in its judgment it may appear to be advisable, iix9o[c 



172 North Carolina Corporation Code 

corporation commission may issue such rules, instructions, and 
regulations prescribing the manner of keeping books, accounts, 
and records of banks as will tend to produce uniformity in the 
books, accounts, and records of banks of the same class. 
1921, c. 4, s. 70. 

284. Reserve, when below legal requiranent. When the re- 
serve of any bank falls below the amount required by law, it 
shall not make new loans or discounts, otherwise than by dis- 
counting or purchasing bills of exchange, payable at sight or on 
demand, nor make dividends of its profits until the reserve re- 
quired by law is restored. The corporatiou commission shall 
require any bank whose reserve falls below the amount herein 
required immediately to make good such reserve. In case the 
bank fails for thirty days thereafter to make good its reserve, the 
corporation commission may forthwith take poBsession of the 
property and business of such bank until its affairs be adjusted or 
finally liquidated as provided for in this act. 

1921, c. i, a. 71. 

AET. 8. BANK EXAMINERS. 

286. Bank examiners, appointed by corporation commission. 

The corporation commission, for the purpose of carrying out 
the provisions of this act, shall appoint from time to time a 
chief state bank examiner, such state bank examiners, assistant 
state bank examiners, clerks, and stenographers as may be neces- 
sary to make a thorough examination of and into the ailfairs of 
every bank doing business under this act, as often as the commis- 
sion may deem necessary, and at least once each year. The corpo- 
ration commission may at any time remove any person appointed 
by it under this act. 
1921, e. 4, B. 72. 

286. Bank ^aminers, duties, and powers. It shall be the 
duty of the examiners to verify all reports made to the corpora- 
tion commission by the officers and directors, members, or indi- 
viduals conducting any banking institution, as required by this act 
or by the corporation commission. The officers of every bank 
shall submit and surrender its books, assets, papers, and concerns 
to the examiners appointed under this act, who shall retain the 
custody and possession of such books, assets, papers, and concerns 
for such length of time as may be required for the purpose of 
making an examination as required by this act. If any ofQcer 



North Carolina Corporation Code 173 

shall refuse to surrender the books, assets, papers, and concerns as 
herein provided, or shall refuse to be examined under oath touch- 
ing the affairs of such bank, the said examiner may forthwith take 
possession of the property and business of the bank and liquidate 
its affairs in accordance with the provisions of this act. 
IB21, e. 4, H. 73. 

287. Officers and employees, removU of. The corporation com- 
mission shall have the right, and is hereby empowered, to require 
the immediate removal from office of any officer, director, or em- 
ployee of any bank doiug business under this. act, who shall be 
found to be dishonest, incompetent, or reckless in the manage- 
ment of the affairs of the bank, or who persistently violates the 
laws of this state or the lawful orders, instructions, and regula- 
tions issued by the corporation commission. 

1921, c. 4, a. 74. 

288. Examiners xaaj administer oath. For the purpose of mak- 
ing examinatiooe as required by this act, any duly appointed ex- 
aminer may administer oaths to examine any officer, director, 
agent, employee, customer, depositor, shareholder of such bank, 
or any other person or persons, touching its affairs and business. 
Any examiner may summons in writing any officer, director, agent, 
employee, customer, depositor, shareholder, or any person or per- 
sons resident of this state to appear before him and testify in 
relation thereto. 

1931, o. 4, B. 75. 

289. Examiners may make arrest. When it shall appear to any 
examiner, by examination or otherwise, that any officer, agent, 
employee, director, stockholder, or owner of any bank has been 
guilty of a violation of the criminal laws of this state relating 
to banks, it shall be his duty, and he is hereby empowered to 
hold and detain such person or persons until a warrant can be 
procured for his arrest ; and for such purposes such examiner 
shall have and possess all the powers of peace officers of such 
county, and may make arrest without warrant for past offenses. 
Upon report of his action to the corporation commission, it maj- 
direct the release of the person or persona so held, or, if in its 
judgment such person or persons should be prosecuted, the com- 
mission shall cause the solicitor of the judicial district in which 
such detention is had to be promptly notified, and the action 
against such person or persons shall be continued a reasonable 
time to enable the solicitor to be present at the trial. 

»■.<■■'.•■"■ D„..db,Cooglc 



174 NoETU Carolina Corporation Code 

290. Annual examinatioQ. One examiDation each year shall be 
designated the annual examinatioD, and for such examination, 
or any special examination, the bank ahall pay into the office of 
the corporation commission an examination fee not in excess of 
the following : Banks having total resources of not more than 
one hundred thousand dollars (*100,000), twenty dollars ($20); 
those having total resources of more than one hundred thousand 
dollars ($100,000) and not over two hundred thousand dollars 
($200,000), twenty-eight dollars ($28); those having total re- ' 
sources of more than two hundred thousand doHars ($200,000) 
and not over three hundred thousand dollars ($300,000), thirty- 
two dollars ($32) ; those having total resources of more than three 
hundred thousand dollars ($300,000) and not over four hundred 
thousand dollars ($400,000), thirty-six dollars ($36) j those hav- 
ing total resources of more than four hundred thousand dollars 
($400,000) and not more than five hundred thousand dollars 
($500,000), forty dollars ($40); those having total resources of 
more than five hundred thousand dollars -($500,000) and not more 
than seven hundred and fifty thousand dollars ($750,000), forty- 
eight dollars ($48) ; those having total resources of more than 
seven hundred and fifty thousand dollars ($750,000) and not more 
than one million dollars ($1,000,000), sixty d<dlars ($60), plus 
three dollars ($3) for each one hundred thousand dollars ($100,- 
000) and fraction thereof until its resources reach five million 
dollars ($5,000,000), and then two dollars ($2) for each additional 
one hundred thousand dollars ($100,000) and fraction thereof. 
All examinations made, other than those designated annual ex- 
aminations, shall be deemed to be special examinations. In addi- 
tion to the examination fees required to be paid, the banks under 
examination shall pay the expenses incurred by the examiners, 
which expenses may be prorated among the several banks of the 
state upon such a basis as may in the opinion of the corporation 
commission appear to be equitable and fair. For services per- 
formed for any bank other than examinations, the corporation 
commission may make such charge as in its opinion is fair and 
just. The corporation commission shall fix the compensation to 
be paid to the chief state bank examiner, state bank examiners, 
assistant .state bank examiners, clerks, and stenographers em- 
ployed in the banking department of the commission. The total 
compcDsation of said examiners, clerks, and stenographers shall 
not exceed in any one year the total fees and expenses collected 
under the provisions of this act. 

"2'' •■*•■•"■ D,...d.,Cooglc 



North CAROLraA Corporation Code 175 

291. Examiners shall make report. Examiners shall make a 
full and detailed report in writing to the corporation commission 
of the condition of each bank within ten days aftef each and 
every examination made by them. 



ART. 9. PENALTIES. 

292. Examiner mtvking false report. If any bank examiner 
shall knowingly and willfully make any false or fraudulent report 
of the condition of any bank, which shall have been examined by 
him, with the intent to aid or abet the officers, owners, or agents 
of such bank in continuing to operate an insolvent bank, or if any 
such examiner shall keep or accept any bribe or gratuity given 
for the purpose of inducing him not to file any report of examina- 
tion of any bank made by him, or shall neglect to make an ex- 
amination of any bank by reason of having received or accepted 
any bribe or gratuity, he shall be guilty of a felony, and on con- 
viction thereof shall be imprisoned in the state's prison for not 
less than four months nor more than ten years. 

1921, e. 4, s. 79. 

293. Examiners disclosing confidential information. If any 
bank examiner or other employee of the banking department of 
the corporation commission fails to keep secret the facts and 
information obtained in the course of an examination of a bank, 
excepts when the public duty of such examiner or employee re- 
quires him to report upon or take ofHcial action regarding affairs 
of such bank, he shall be guilty of a misdemeanor, and upon con- 
viction thereof shall be fijied not more than five hundred dollars 
or imprisoned not more than twelve months, or both, in the dis- 
cretion of the court. Nothing in this section shall prevent the 
proper exchange of information with the representatives of the 
banking departments of other states, with the federal reserve 
bank or national bank examiners, or other authorities, with the 
creditors of such bank or others with whom a proper exchange 
of information is wise or necessary, or with the clearing-house 
ofBciaU and examiners. 

1921, e. 4, «. 80. 

394. Bank, unauUiorized nse of the word. No corporation shall 
hereafter be chartered under the laws of this state with the 
words ' ' bank, " " banking, " " banker, " or " trust " as a part of its 
name except corporations reporting to the corporation commission 
and onder its supervision, or under the supervision of the^Jnsur- 



176 NoBTH Cabouna Corpobation Code 

ance commissioner ; nor shall any corporate name be so amended 
as to include the words "bank," "banking," "banker," or 
"trust," unless the corporation be under such provision. No per- 
son, association, firm, or corporation domiciled within the state 
of North Carolina, except corporations, persons, associations, or 
firms reporting to and under the supervision of the corporation 
commission, or under the supervision of the Insurance Commis- 
sioner, shall therein advertise or put forth any sign as bank, 
banking, banker, or trust company, or use the word bank, bank- 
ing, banker, or trust as part of its name and title : Provided, 
that this act shall not be held to prevent any individual as such 
from acting in, any trust capacity as herebefore. Any violation 
of the provisions of this section shall be a misdemeanor, and upon 
conviction thereof the offender shall be fined in a sum not exceed- 
ing five hundred dollars for each offense. 
1921, e. 4, H. 81. 

296. False reports, willfnlly and maUdonsly makiiig:. Asy 
person who shall willfully and maliciously make, circulate, or 
transmit to another or others any statement, rumor, or suggestion, 
written, printed, or by word of mouth, which is directly or by 
inference derogatory to the financial condition, or affects the sol- 
vency or financial standing of any bank, or who shall counsel, aid, 
procure, or induce another to state, transmit, or circulate any such 
statement or rumor shall be guilty of a misdemeanor, and upon 
conviction thereof shall be fined or imprisoned, or both, in the 
discretion of the court. 

1921, e. 4, 8. 83. 

296. Misapplication, embeszlemeot of funds, etc. Whoever 
being an officer, employee, agent, or director of a bank, embezzles, 
abstracts, or willfully misapplies any of the money, funds, credit, 
or property of such bank, whether owned by it or held in trust, 
or willfully and fraudulently issues or puts forth a certificate of 
deposit, draws an order or bill of exchange, makes an acceptance, 
assigns a note, bond, draft, bill of exchange, mortgage, judgment, 
or decree, or makes a false statement or certificate as to a trust 
deposit or contract, for or under which such bank is acting as 
trustee, or makes a false entry in, or conceals the true and correct 
entry in a book, report, or statement of such bank, or who shall 
loan the funds or credit of any banks to any company or corpora- 
tion known to be insolvent, or which has ceased to exist, or to any 
person upon the collateral security of any stticks or bonds of such 
company or corporation which is known to be insolvent, or which 

.HZ^dDvCOO^IC 



North Carolina Corporation Code 177 

has ceased to exist, or which never had any exisrtence, or ficti- 
tiously borrows or solicits, obtains or receives money for a bank 
not in good faith, intended to become the property of such bank, 
with intent to defraud or injure the bank or another person or 
corporation, or to deceive an officer of the bank or an agent ap- 
pointed to examine the affairs of such bank, or publishes a false 
report relating to the financial condition of the bank, with the 
intent to conceal its true financial condition, or to defraud or 
injure it or another person or corporation, shall be guilty of a 
felony, and upon conviction thereof shall be fined not more than 
ten thousand dollars, or imprisoned in the state's prison not more 
than thirty years, or both. 
1931, e. i, a. S3. 

297. 7alfle o«-tiflcatiOQ of a cbec^. Whoever, being an officer, 
employee, agent, or director of a bank, certifies a check drawn on 
such bank, and willfully fails to forthwith charge the amount 
thereof against the account of the drawer thereof, or willfully 
certifies a check drawn on such bank unless the drawer of such 
check has on deposit with the bank an amount of money subject 
to the payment of such check and equivalent to the amount 
therein specified, shall be guilty of a felony, and upon conviction 
shall be fined not more than five thousand dollars, or imprisoned 
in the state's prison for not more than five years, or both. 

1921, e. 4, s. 84. 

298. Insolvent banks, receiving deposits in. Any person, being 
an oiBcer or employee of a bank, who receives, or being an officer 
thereof, permits an employee to receive money, checks, drafts, 
or other property as a deposit therein when he has knowledge 
that such bank is insolvent, shall be guilty of a felony, and upon 
eonvictioD thereof shall be fined not more five thousand dollars 
or imprisoned in the state's prison not more than five years, or 
both. 

1921, c. 4, s. 85. 

As to civil liability of dirctors and officers making false reports and 
statements as to eonditiou of bank, see 265 supra, and annotations there- 

299. Capital stock, advertiaiiig larger amonnt than th&t paid 
in. It shall be unlawful for any bank to advertise in a newspaper, 
letterhead, or any other way, a larger capital stock than has been 
actually paid-in in cash. Any bank violating this section shall 
be subject to a penalty of five hundred dollars for each and 
every offense. The penalty herein provided for shall be recovered 

DidilzedbyCoO^^Ic 



178 North Cabouna Cobforation Code 

by the state in a civil action in any court o£ competent jurisdic- 
tion, and it shall be the duty of the attorney-general to prosecute 
all such actions. 

1921, c. 4, s. SG. 

300. Offenses against banking law. Any offense against the 
bankiog law of the state of North Carolina which is not else- 
where specifically declared to be a crime, or for which elsewhere 
a penalty is not specifically provided, is hereby declared to be a 
misdemeanor and shall be punishable at the discretion of the 
court. The corporation commission is authorized and directed to 
prosecute all offenses agaioKt the banking laws of the state, and 
to that end is expressly authorized to employ counsel to prose- 
cute in the inferior courts and to aid the solicitor in the superior 
courts. The auditor of the state shall, upon the certificate of the 
chairman of the corporation commission, accompanied by an item- 
ized statement of the account, draw his warrant upon the state 
treasurer to compensate the counsel so employed, and the state 
treasurer shall pay the same out of the funds in the treasury and 
not otherwise appropriated. 

Ex. Session 1921, c. 56, b. 4. 

301. General corporation law to apply. All provisions of the 
law relating to private corporations and particularly those enu- 
merated in the chapter entitled "Corporations," not inconsist- 
ent with this act or with the business of banking, shall he appli- 
cable to banks. 

1921, c. 4, s. 87. 

_ ART. 10. INDUSTRIAL BANKS. 

302. Industrial bank defined. The term "industrial bank" as 
used in this article shall mean any corporation formed under the 
provisions thereof, and any corporation heretofore organized 
under the general corporation law of this state which shall here- 
after reorganize as an industrial bank pursuant to the provisions 
of this article. 

C. 8., S. 255; 1919, c. 225, 8. 1. 

303. Manner of organization. Corporations may be organized 
under this article in the same manner as provided for corpora- 
tions authorized under the chapter on corporations. 

0. S., a. 256; 1919, r. 225, s. 2. 

301. Capital stock. The capital stock of an industrial bank 
shall not be less than twenty-five thousand dollars. 
C. a, 8. 257; 1919, e. 225,h. 3. 

Denized bvCjOOgIc 



NoHTH Cabolina Coopobation Code 179 

306. Corporate title. Every corporatiou incorporated or reor- 
ganized pursuaot to the provisions of this furticle shall be known 
a8 an industrial bank, and may use the word "bank" as part of 
its corporate title. 

C. 8., 8. 258; 1919, c. 225, e. i. 

306. Powers. In addition to the general powers conferred upon 
corporations formed under the chapter on corporations, every in- 
dustrial bank shall have the following powers: 

1. To loan money on real or perHonal security and reserve law- 
ful Interest in advance upon such loans, and to discount or pur- 
chase notes, bills of exchange, acceptances or other choses in 
action. 

2. To sell or offer for sale its secured or unsecured evidences or 
certificates of indebtedness, or investment, and to receive from 
investors therein or purchasers thereof payments therefor in in- 
statlments or otherwise, with or without an allowance of interest 
upon such payments, whether such evidence or certificates of 
indebtedness, or of investment be hypothecated for a loan or not, 
and to enter into contracts in the nature of a pledge or otherwise 
with such investors or purchasers with regard to said evidences 
or certificates of indebtedness, or of investment, and no such 
transaction shall, in any way, be construed to affect the rate of 
interest on sueh loans. 

3. To charge for a loan made pursuant to this section one dol- 
lar for each fifty dollars or fraction thereof loaned, up to and in- 
cluding loans of two hundred and fifty dollars and, for loans in 
excess of two hundred and fifty dollars, one dollar for each two 
hundred and fifty dollars excess or fraction thereof, to cover ex- 
penses, including any examination or investigation of the charac- 
ter and circumstances of the borrower, comaker, or surety. An 
additional fee of five dollars may be charged on such loans where 
same are secured by mortgage on real estate. No charge shall be 
collected unless a loan shall have been made. 

4. To establi-sh branch offices or places of business within the 
county in which its principal office is located, but not elsewhere. 

C. 8., 9. 259; 1919, r. 225, a. 5. 

307. Bestrictiom on powers. N'o industrial bank shall— 

1. Make any loan under the provisions of this article for a 
longer period than one year from the date thereof. 

2. IVposit any of its funds in any banking corpnration unless 
siicli corporation has been designated as sueh depository by a vote 



180 North Carolina Corporation Code 

of a majority of the directors, or of the executive committee, ex- 
elusive of any director who is an officer, director, or trustee of 
the depository so designated, present at any meeting duly called 
at which a quorum is in attendance. 
C. a, a. 260; 1919, c. 223, b. 7. 

308. Limit of loans. The total liabilities to any industrial bank 
of any person, corporation, company, or firm, for money bor- 
rowed, including in the liabilities of the company or firm, the lia- 
bilities of the several members thereof, shall at no time exceed 
ten per cent of the actually paid-up capital and surplus of such 
industrial bank, but the discount of bona fide bills of exchange 
or acceptances drawn against actually existing values, and the 
discount of commercial or business paper actually owned by the 
person or persons, corporation, company, or firm negotiating the 
same, shall not be considered money so borrowed. 

C. a, a. 261; 1919, c. 225, b. 6. 

309. Directtnrs. At least three-fourths of the number of direc- 
tors of any industrial bank shall be residents of the state of North 
Carolina. 

C. a, B. 262; 1919, e. 225, b. 8. 

310. Superrision and ezamination. Every industrial bank 
formed under the provisions of this article shall be subject to 
supervision by the corporation commission and subject to exami- 
nation in the same manner as is provided in the case of state banks 
so far as the same may be applicable and not inconsistent with the 
provisions of this article. 

C. S., B. 263; 1919, c. 225, s. 9. 

311. Previottsly organized corporations may qualify. Any 
corporation heretofore organized under the general corporation 
law of this state, and authorized by its charter or articles of in- 
corporation to engage in the business described in this article, 
shall, upon filing notice with the secretary of state and the corpo- 
ration commission on or before January first, one thousand nine 
hundred and twenty, be recognized as an industrial bank within 
the provisions of this article and shall be subject to this article to 
the same extent as if actually incorporated hereunder. 

C. S., a. 264; 1919, c. 225, b. 10. 

The Par Clearance Act, Chapter 20, Laws of 1921, having been 
declared unconstitutional by the Supreme Court of North Caro- 
lina in the ease of Farmers and iVIerchants Bank v. Federal Re- 
serve Bank of Richmond, Va., on May 24, 1922, is omitted, r , 



CHAPTER V. 
NEGOTIABLE INSTRUMENTS. 

ART. 1. GENERAL PROVISIONS. 

SectioD 

Deflnitions 312 

FersoDB primarily liable on inBtrument . . . ' 31S 

What constitDtes reaBonabte time 314 

When law merchant governs 31& 

Acta to be done on Sundaj or holiday 318 

Application of chapter . . . ■ 317 

ART. 2. FORM AND INTERPRETATION; 

Form of negotiable instrument 318 

What eonatitateB certainty as to sum 319 

When promise ie nnconditional 320 

What conatitutes determinable future time 321 

Additional provisions as affecting negotiability ....... 322 

Effect of omiBsionsi seal; designation of particular money .... 323 

When payable on demand 324 

When payable to order 325 

Whan payable to bearer 336 

No forma] language rc(juired . . . . ■ 327 

Presumption as to date 33B 

Antedated and postdated 329 

When date may be inserted 330 

When blanks may be filled 331 

Incomplete instrnment not delivered 338 

Delivery necessary; when effectual; when presumed 333 

Construction where instrument is ambigaous 334 

Signature mast appear; trade or assumed name 33.> 

Signature by agent; how authority shown 33n 

Liability of person signing as agent 337 

Effect of signature by procuration ■ 338. 

Effecfr of forged signature 33*9 

ART. 3. CONSIDERATION. 

Presnmption of consideration 340 

What constitutes consideration 341 

What constitutes a holder for value 342 

When lien on instrument constitutes holder for value ...... 343 

Effect of want of consideration 344 

Liability of accommodation party 31S 

ART. 4. NEGOTIATION. 

What constitutes negotiation 346 

How indorsement made 347 

Effect of indorsement by infant o'r corporation 348 

Indorsement must be of entire instrument 349 

Kinds of indorsement 3S0 

Special indorsement; indorsement in blank 351 

Bow blank indorsement changed to special indorsement 352 

When indorsement restrictive 353 

Effect of restrictive indorsement; right of indorsee ....... 334 

<)Da1ilIed indorsement rrii-'ir' Ciot)^?^ 



182 NoBTH Carolina Cobpoeation Code 

Conditional indorsement 356 

Indorsement of iuBtrumeat payable to bearer 357 

Indoreement of instrument payable to two or more persona .... 35S 

Effect of instrument drawn or indoraed to a person as rushier . 359 

Indorsement, where payee's name misspelled 360 

Indorsement iu representative capacity 361 

Presumption us to time of indorsement 362 

Presumption as to place of indorsement 363 

Continuation of negotiable character . - 364 

Striking out iudorsement 365 

Effect of transfer without indorsement 366 

When prior party may negotiate instrument 367 

ART. 5. BIGHTS OP HOLDER. 

Riglit of holder to sue; payment - 36S 

What constitutes holder in due course 369 

When person not deemed holder in due course 370 

Notice before full amount paid 371 

When title defective 372 

What constitutes notice of defect . ■ 373 

Bights of holder in due course 374 

When subject to original defenses 375 

Who deemed bolder in due course 374 

ABT. 0. LIABILITY OF PABTIES. 

Liability of maker 377 

Liability of drawer 378 

Liability of acceptor ■ 379 

When person deemed indorser 380 

Liability' of" irregular indorser 381 

Warranty, where negotiation by, delivery 382 

Liability of general indorser - 383 

Liability of iudorser, where paper negotiable by delivery .... 384 

Order in which indorscrs are linble 385 

Liability of agent or broker 386 

ART. 7. PRESENTMENT FOB PAYMENT. 

Effect of want of demand on principal debtor 387 

Presentment, where instrument is not pnviiblo on demand .... 388 

What constitutea a anfficieut presentment 389 

Place of presentment 390 

Instrument must be exhibited 391 

Presentment where instrument payable at bank 392 

Presentment where principal debtor is dead - 393 

Presentment to persons liable aa partners 394 

Presentment to joint debtors 395 

When preaeutment not required to charge the drawer ..... 396 

When preaentment not required to charge the indorser 397 

When delay in presentment is excused 398 

When presentment may be dispensed with 399 

When instrument dishonored by nonpayment 400 

Liability of persons secondarily liable when instrumout dishonored . 401 

Time of maturity ■ 402 

When days of grace allowed 403 

How time is computed • . 404 

Rule where tnatrument ia pavable at bank 405 

~ ' ■>*'"■"' '" ""• "■»™ ■ • • ■D„i..db,CO()ylf° 



NOETH CABOLINA COBPOEATION CODE 183 

ART. 8. NOTICE OP DI8H0N0B. 

Section 

To whom notiee of diabODor must be given 407 

By whom notice given . . ' 408 

Notice siven by agent 409 

Effect o( notice given on behalf of holder 410 

Effect, where notice ia given by party entitled thereto 411 

When agent may give notice 412 

When notice sufficient 413 

Fonn of notiee ■ 414 

To whom notice may be given 415 

Notiee when party ia dead ' 416 

Notiee to partners 417 

Notiee to peraons jointly liable 418 

Notice to banhrupt ■ . . . . 419 

Time within which notice must be given 420 

Notice where parties reside in the same place 421 

Notice where parties reside in different places 422 

When sender deemed to have given due notice 423 

What ronstitutea deposit in poatoffice 424 

Time of notice to anteeedent parties 42S 

Where notice must be sent 426 

Waiver of notice 427 

Who affected by waiver 428 

Waiver of protest 429 

When notice ia dispensed with 430 

Delay in giving notice 431 

When notice need not be given to drawer 432 

When notice need not be given to iadorser 433 

Notice of nonpayment where acceptance refused 434 

Effect of omission to give notice of nonacceptance 435 

WhoD protest need not be made; when it must be made 4iSt> 

ART. 9. DI8CHABGE. 

Bow instrument discharged 437 

Discharge of peraon secondarily liable 43S 

Bight of party paying instrument 439 

Benunciation by bolder 440 

Unintentional cancellntioni burden of proof 441 

Effect of alteration of instrument '442 

What constitutes a material alteration 443 

ABT. 10. BILLS OF EXCHANGE. 

Bill of exchange defined . - 444 

Bill not an assignment of funds in hands of drawee 445 

Bill addressed to more than one drawee 446 

Inland and foreign bills of exchange 447 

When bill may be treated as promissory note 448 

Beferoe in case of need 449 

ABT. U. ACCEPTANCE. 

Acceptance defined; how made 450 

Holder entitled to acceptance on face of bill 451 

Acceptance by separate instrument 452 

When promise to accept eiuivalent to acceptance 453 

Time allowed drawee to accept 454 

Liability of drawee retaining or destroying bill 455 

Acceptance of incomplete bill • . . ^i~ . . • 458 

DK|,iz.db.CA>OglC 



184 NOETH Caeolina Coeporation COIffi 

Section 

Kinds of acceptance 4S7 

What conatitatsB a general acceptance 4SS 

What conatitutea a qualified acceptance . ■ 4S9 

Rights of partiea as to qualilied acceptance 460 

AKT. IS. PRESENTMENT FOB ACCEPTANCE. 

When preaentmeat for acceptance tnuet be made 461 

Failnre to preaent in reasonable time diacbBTges drawer and IndoraerB 462 

How preaentment made 483 

On what dafa preaentment may be made 464 

Freseutment where time is inauf&cient . . , '. 46S 

Where preaentment is excused 46fi 

When dishonored by nonacceptance 487 

Duty of holder, where bill not accepted 468 

Bights of holder, where bill not accepted 469 

ART. 13. PROTEST. 

In what casea protest necessary 470 

How protest made - 471 

By whom protest made 472 

When proteat to be made 473 

Where protest made 474 

Protest both for nonacceptance and nonpayment 475 

Protest before maturity, where acceptor insolvent . . ■ . . 476 

When proteat dispensea with 477 

Proteat where bill ia loat 478 

ART. 14. ACCEPTANCE FOR HONOK. 

When a bill may be accepted for honor 470 

How acceptance for honor made 480 

When deemed an acceptance for honor of drawer 481 

Liability of acceptor for honor 482 

Agreement of acceptor for honor 483 

Maturity of bill payable after sight accepted for honor 484 

Proteat of bill accepted for honor 48S 

How presentment for payment to acceptor for honor made .... 466 

When delay in making presentment ezcuaed 487 

Dishonor of bill by acceptor for honor 488 

ART. 15. PAYMENT FOB HONOR. 

Who may make payment for honor 489 

How payment for honor must be made 400 

Declaration before payment for honor 491 

Preference of parties offering to pay for honor 402 

Effect on subsequent parties, where bill ia paid for honor .... 493 

Where holder refuses to receive payment supra proteat 494 

Bights of payer for honor ... - 496 

ART. 16. BILLS IN A SET. 

Bills in a set constitute one bill 496 

Bights of holders, where different parte are negotiated 497 

Liability of holder who indorses two or more parts of a aet to different 

persona 408 

Acceptance of bills drawn in acta 499 

Payment by acceptor of bills drawn in aeta 500 

Effect of diachargiug one of a set 



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North Caeolina Cobporation Code 185 

abt. 17. pbomis80by notes and checks. 

Section 

Negotiable promiaBorj note defined 502 

Cbeck defined 503 

'Within what time a check must be presented 504 

Effect of certification of check 505 

Effect, where holder of check procures it to be certified 50G 

Check not assignment of funds . ■ GOT 

ART. 1. GENERAL PROVISIONS. 

312. Deflnltions. In this chapter, unless the context otherwise 
requires — 

"Acceptance" means an acceptance completed by delivery or 
notification. 

"Action" includes counterclaim and setof£. 

"Bank" includes any person or association of persons carry- 
ing on the business of banking, whether incorporated or not. 

"Bearer" means the person in possession of a bill or note which 
is payable to bearer. 

Steinhilper et al v. Basnight, 153 N. C. 293, 69 S. E. 220. 
Majeri V. McBimmon et al, 140 N. C. 640, 53 S. E. 447. 

"Bill" means bill of exchange, and "note" means negotiable 
promissory note. 

"Delivery" means transfer of possession, actual or construc- 
tive, from one person to another. 

"Holder" means the payee or indorsee of a bill or note who is 
in possession of it, or the bearer thereof. 

Steinhilper et al v. Basnight, 153 N. C. 293, 69 S. E. 220. 

UaTers v. UcBimmon et al, 140 N. C. MO, 53 8. E. 447. 

"Indorsement" means an indorsement completed by delivery. 

"Instrument" means negotiable instrument. 

"Issue" means the first delivery of the instrument, complete in 
form, to a person who takes it as a holder. 

"Person" includes a body of persons, whether incorporated or 
not. 

"Value" means valuable consideration. 

"Written" includes printed, and "writing" includes print. 

C. S., B. 2976; Bev., 8. 2340; 1899, c. 733, a. 191. 

313. Parson primarily liable on Instniinent. The person pri- 
marily liable on an instrument is the person who by the terms of 
the instrument Is absolutely required to pay the same. All other 
parties are secondarily liable. 

C. a, s. 2977; Bev., s. 2342; 1899, c. 733, b. 192. 

Pilnelp&l and Snntr 8 66. Both the principal and aorety, if the fact of 



NOBTH Carolina Corpokation Code 



BlUs and Notes g491. Where one whose name appeared on a note ad- 
initted execution and nonpayment, the burden is upon him to prove axy 
matter in release. — Ibid. 

Principal and Surety g 66. A surety on a note is primarily liable there- 
on within section above, declaring that the person primarily liable on an 
inatrument is the person who by the terms thereof is absolutely required 
to pay the same. — Kouso v. Wooten, HO N. C. 557, 53 S. E. 430. 

314. What coDstitTites reasonable time. Id determining what 
ia reasonable time or an unreasonable time regard is to be had to 
the nature of the instrument, the usage of trade or business (if 
any) with respect to such instruments, and the facts of the par- 
ticular case. 

C. S., B. 2978; Rev., s. 2343; 1899, e. 7S3, s. 103. 

Singer Mfg. Co. v. Summers, 143 N. C. 102, 55 8. E. 522, 

S16. When law merchant governs. In any case not provided 
for in this chapter the rules of the law merchant shall govern, 
C. S., s. 2979; Bev., s. 2344; 1899, e, 733, s. 196. 

316. Acts to be done on Sunday or holiday. Where the day, or 
the last day, for doing any act herein required or permitted to be 
done falls on Sunday, or on a holiday, the act may be done on 
the next succeeding secular or business day. 

C. S., B. 29S0; Bev., b. 2839; 1899, c. 733, s. 194. 

317. Application of chapter. The provisions of this chapter do 
not apply to negotiable instriunents made and delivered prior to 
the eighth day of March, one thousand eight hundred and ninety- 
nine. 

C, a, 8. 2981; Bev,, 9. 2345; 1899, t. 733. s. 195. 

ART. 2. FORM ANI> INTERPRETATION. 

318. Form of negotiable instrument. An instrument to be nego- 
tiable must conform to the following requirements: (1) It must 
be in wrfting and signed by the maker or drawer; (2) must con- 
tain an unconditional promise or order to pay a sum certain in 
money; (3) must be payable on demand or at a fixed or deter- 
minable future time; (4) must be payable to the order of a 
specified person or to bearer; and (5) where the instrument ia 
addressed to a drawee, he must be named, or otherwise indicated 
therein with reasonable certainty. 

. C. S., B. 2982; Bev., s. 2151; 1899, c. 733, s. 1. _, 

D,:|,lz.db.,.CA>OgIC 



North Carolina Corporation Code 187 

BlUa ftnd Notes § 147. A note to bo negotiable must be pa:rable to the 
order of a>Bpecified person, or to bearer. — Johnson v. Lassiter, 155 N. C. 47, 
71 S. E. 23. 

BUlS and Not«fl fi ISO. A writing providing that for value received the 
signers jointly and severally promise to pay another or order a certain 
sum at a certain bank with interest and without any relief from valuation 
of appraisement law, being diilv signed and dated, was n negotiable instru- 
ment.— Myers v. Petty, 153 N.'C. 462, 66 S. E. 417. 

BUla and Notes g 1B0> A note not payable to order or bearer is non-nego- 
tiable. Newland v. Moore, 173 N. C. 728, 92 S. E. S67. 

Bills and Notes §164. A note which recited that it was aub.iet'.t to the 
proi-isionB of a deed is conditional and not negotiable. Pope & Ballance v. 
Eighter-Parry Lumber Co., 162 N. C. 206; 78 S. E. 65. 

Bills and Notes §151. The negotiability of a note ia not destroyed by 
the fact that it bears on its face the words and figures "No. of Note 
2,821. No. of Policy, 634,97 1. "—Breese v. Crumpton, 121 N. C, 122, 38 
8. E. 351. 



Ill, 104 S. E. 134. 



the United States Court for the Eastern District of North Carolina. 
Court that heard it was composed of Chief Justice Fuller; and Judges Mor- 
ris and Brawley, and it held that a receiver's certifitate is not negotiable 
nithin the law merchant, so as to relieve the purchaser or his assignee from 
equities arising out of the proceedinKa in the case. The Court said in its 
'opinion, referring to receivers' certificates: "They are not commercial pa- 
per, and the purchaser or assignee can only recover upon them to the extent 
of the rights of the first payee. He ia put upon inquiry, as to all that was 
done in the cause wherein the certtficateB are issned, and chargeable n-ith 
notice. As said bv the Court in Union Trust Co. v. 111. Midland Co., 117 
U. S. 456, 6 Sup. Ct. 809, 29 L, Ed. 963: 'The receiver and those lending 
money to him on certificates issued and orders made without prior notice 
to the parties interested take the risk of the final action of the court 
in regard to the loans. The court always retains control of the matter; 
its records are accessible to lenders and subsequent holders, and the certifi- 
cates are not negotiable instruments.' " 

In a creditors' suit against a private corporation to which neither the 
bondholders of the corporation nor the trustee in the mortgage securing the 
same are parties, the court has no authority to issue receivers' certificates 
for pre-existing debts of the corporation and make the same a first lien 
on its property. Union Trust Co. v. Southern Sawmills & Lumber Co., Ififi 
Fed. 193, 92 C. C. A., 101. This case was heard in the Circuit Court of Ap- 
peals before Judges Waddill, Boyd and Dayton; and this case likewise was 
a North Carolina case coming up from the U. 8. Circuit Court for the East- 
ern District of North Carolina at Baleigh. 

319. What constitutes certainty as to simi. The sum payable 
18 a sum certain withjn the meaning of this chapter, although it 
18 to be paid (1) with interest; or (2) by stated installments; 
(3) by stated installments with a provision that upon default in 

D,:„lzcdbvC00^IC 



188 NoETH Carolina Corporation Code 

payment of any installment the whole shall become due; or (4) 
with exchange ; whether at a fixed rate or at the current rate ; or 
(5) with C08t3 of collection or an attorney's fee in case payment 
shall not be made at maturity. But a provision incorporated 
in the instrument to pay counsel fees for collection is not enforce- 
able, but does not aSect the other terms of the instrument or the 
negotiability thereof. 

C. 8., a. 2983; Rev., SB. 2152, 2346; 1899, c. 733, Sb. 2, 197; 1905, c. 327. 

BlllB and Not«e g 110. Where suit was iuatituted in North CaroUca od a 
note executed and payable in Georgia, the validity of a proviBion in U 
(or attorney's feea in ease of suit niuat be determined by the laws of North 
Carolina, and such provision ia void in this state and canpot be enforced. 
Biehange Bank v. Appalachian Land ft Lumber Co., 128 N. C. 193, 38 S. E. 
813. 

320. When promise is oncondltionaL An unqualified order or 
promise to pay is unconditional within the meaning of this chap- 
ter, though coupled with (1) an indication of a particular fund 
out of which reimbursement is to be made, or a particular ac- 
count to be debited with the amount; or (2) a statement of the 
transaction which gives rise to the instrument. But an order or 
promise to pay out of a particular fund is not unconditional. 

C. B., B. 2984; Rev., b. 2153; 1S99, c. 733, a. 3. 

BUls and Notw §342. A note that indicated on its face the purpose for 
which it was given did not make it conditional. Bank of Sampaoo v. 
Hatcher, 151 N. C. 359, 66 8. E. 308. 

Municipal Ooiponitlona g 938. Bonds isaucd by a municipality which 
apecify the fund from which they arc to be paid, held negotiable withiii 
the negotiable instruments act, OommiBaionera of Cleveland County v. 
Citizens Natl. Bank of GaBtonia, 157 N. C. 191, 72 8. E. 990. 

Bills and Notes § 164. A note vi-hich recited that it waa subject to the 
provisionE of a deed ia conditional and not negotiable. Pope & Ballauce 
V, Bighter-Parry Lamber Co., 162 N. C. 20G, 78 8. E. 65. 

321. What comititutes determinable future time. An instru- 
ment is payable at a determinable future time, within the meaning 
of this chapter, which is expressed to be payable {1} at a fixed 
period after date or sight; or (2) on or before a fixed or deter- 
minable future time specified therein; or (3) on or at a fixed 
period after the occurrence of a specified event which is certain 
to happen, though the time of happening be uncertain. An in- 
strument payable upon a contingency is not negotiable, and the 
happening of the event does not cure the defect. 

C. 8., s. 2985; Bev., b. 2156; 1899, c. 733, a. 4. 

BillB and Notes g 109. A Btipulation in a note that it shall become due 
where there is a default in the payment of interest for ten daya after de- 
mand is valid. Newborn Banking & Trust Co. v. Dnffy, 153 N. C. 62, 68 



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NOBTH CaBOLINA COBPORATION CODE 189 

Bills and NotM &109. Notes, atipulatine that, if the interest thereon 
Bball not be paid when due, the whole indebtedneSH shall become due, ma- 
ture on inch default in intei'sBt. — Batterj Park Bank t. Loughian, 122 N. 0. 
668, 30 8. E. 17. 

322. Additional protisions as affectmg negotiability. An in 
fitrument which contBins an order or promise to do any act in ad- 
dition to the payment of money is not negotiable. But the nego- 
tiable character of an instrument otherwise negotiable is not 

affected by a provision which (1) authorizes the sate of coUatpral 
securities in case the inatniment be not paid at maturity; or (2) 
authorizes a eonfessioii of judgment if the instrument be not paid 
at maturity; or (3) waives the benefit of any law intended for 
the advantage or protection of obligor; or (4) gives the holder 
an election to require something to be dune in lieu of payment of 
money. But nothing in this section shall validate any provision or 
stipulation otherwise illegal, nor authorize the enforcement of an 
authorization to confess judgment or a waiver of homestead and 
personal property exemptions. 

C. S., 8. 2986; Eov., ee. 2154, 2346; 1899, e. 733, ss. 5, 197; 1905, c. 327. 

Ab to eomiBel fees, see Bee. 319. 

Bills and Notes §99. Where suit was instituted iti North Carolina on a 
note executed and payable in Georgia, the validity of a provision waiving 
homestead exemption must be determined by the laws of North Carolina, 
and such provision eannot be enforced. Exchange Bank v. Appalachian 
Land & Lbmber Co., 128 N. C. 193, 38 S. E. 813. 

323. Effect of onusslotis; seal; deaignation of particular 
money. The validity and negotiable character of an instrument 
are not affected by the fact that (1) it is not dated; or (2) does 
not specifiy the value given, or that any value has been given 
therefor; or (3) does not specify the place where it is drawn or 
the place where it is payable ; or (4) bears a seal ; or (5) designates 
a particular kind of current money in which payment is to be 
made. But nothing in this section shall alter or repeal any stat- 
ute requiring in certain cases the nature of the consideration 
to be stated in the instrument. 

C. B., B. 2SS7; Rev., s. 2156; 1809, c. 733, s. 6. 

324. When payable on demand. An instrument is payable on 
demand (1) when it is expressed to be payable on demand, or at 
sight or on presentation; or (2) in which no time for payment is 
expressed. Where an instrument is issued, accepted, or indorsed 
when overdue, it is, as regards the person so issuing, accepting, 
or indorsing it, payable on demand. 

C. B., a. 2988; Bev., ■. 3157; 1899, c 738, s. 7. 

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190 North Carolina Corporation Code 

B1U> and Notw g 129. A' note pavable on demand is due on the day of 
its date. Causey v. Siiow, 122 N. C. 326, 29 S. E. 359. 

talmltation of Actions § 48. When do time is specified for the payment 
of a bond it is due at its execution, and the statute of limitations begins to 
run at once. Ervin v. Brooks, 111 N. C. 358, 16 S. E. 240. 

^6. When payable to order. The instrument is payable to 
order when it is drawn payable to the order of a specified person, 
or to him or his order. It may be drawn payable to the order of 
(1) a payee who is not maker, drawer or drawee ; or(2) the drawer 
or maker; or (3) the drawee; or (4) two or more payees jointly; 
or (5) one or more of several payees; or (6) the holder of an ofiSce 
for the time being. When the instrument is payable to order, the 
payee must be named or otherwise indicated therein with reasona- 
ble certainty. 

C. 8., B. 2989; Bev., a. 2158; 1899, e. 733, s. 8. 
Bills and Notes § 147. A 

order of a specified person, t 
71 8. E. 23. 



326. When payable to bearer. The instrument is payable to 
bearer (1) when it is expressed to be so payable; or (2) when it 
is payable to a person named therein or to bearer; or (3) when 
it is payable to the order of a fictitious or nonexisting person, and 
such fact was known to the person making it so payable ; or (4) 
when the name of the payee does not purport to be the name of 
any person; or (5) when the only or last indorsement is an in- 
dorsement in blank. 

C. a., B. 2990; Rev., s. 2159; 1899, c. 733, a. 9. 

327. No formal language required. The negotiable instrument 
need not follow the language of this chapter, but any terms are 
sufficient which clearly indicate an intention to conform to the 
requirements hereof. 

C. S., B. 2991; Hev., a. 2160; 1899, c. 733, s. 10. 

328. Presumption as to date. Where the instrument or an 
acceptance or any indorsement thereon is dated, such date is 
deemed prima facie to be the true date of the making, drawing, 
acceptance or indorsement, as the ease may be. 

C. S., a. 2992; Eev., a. 2161; 1899, e. 733, 8. 11. 

329. Antedated and postdated. The instrument is not invalid 
for the reason only that it is antedated or postdated, provided 
that this is not done for an illegal or fraudulent purpose. The 



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NoBTH Carolina Corporation Code 191 

person to whom an iDstmment so dated is delivered acquires the 
title thereto as of the date of delivery. 
C. S., s. S993; Hev., b. 2162; J899, c. 733, a. 12. 

330. When date may be inserted. When an iBstrumeot ex- 
pressed to be payable at a fixed period after date is issued, undat- 
ed, or where the acceptance of an instrument payable at a fiied 
period after sight is undated, any holder may insert therein the 
tme date of issue or acceptance, and the instrument shall be pay- 
able accordingly. The insertion of a wrong date does not avoid 
the instrument in the hands of a subsequent holder in due course ; 
bat as to him the date so inserted is to be regarded as the true 
date. 

C. S., B. 2994; Bev., i. 2163; 1899, r. 7.13, a. 13. 

331. When blanks may be filled. Where the instrument is 
wanting in any material particular, the person in possession 
thereof has a prima facie authority to complete it by filling up 
the blanks therein. And a signature on a blank paper delivered 
by the person making the signature in order that the paper may 
be converted into a negotiable instrument operates as a prima 
facte authority to fill it np as such for any amount. In order, how- 
ever, that any Bueb instrument when completed may be enforced 
against any person who became a party thereto prior to its com- 
pletion, it must be filled up strictly in accordance with the au- 
thority given and within a reasonable time. But if any such in- 
strument after completion be negotiated to a holder in due course, 
it is valid and effectual for ail purposes in his hands, and be may 
enforce it as if it had been filled up strictly in accordance with 
the authority given and within a reasonable time. 

C. 8., B. 2995; Bev., b. 21fi4; 1899, c. 733, a. 14. 

BUb Hid HotM geo. Where one signs n nole in blank and gives it to 
iDOlher, who fills in the name of tbo pnyce and thp amount, the signer is 
Ii»ble on the note to any bolder in good faith. Phillips v. Heualev, 175 
N. C. 23, 94 8. E. 673. 

Bills and Notes g 327. A person dealing with a negotiable instrnment 
ku tbe right to act on it as it appearfi on the faee of it.— Citizens Natl. 
Bank of Dnrham v. Buieh, 145 N. C. 317, 59 8. K 71. 

332. Incomplete instnunent not delivered. Where an incom- 
plete instrument has not been delivered it will not, if completed 
and negotiated without authority, be a valid contract in the hands 
of any holder as against any person whose signature was placed 
thereon before delivery. 

C. S., e. 2996; Bev,, a. 21(15; 1899, c. 733, s. IS. 

Alt. of Uiata. g IS. It the maker of & sealed note, blaok aa to ttu M76e'B , 



192 NoBTH Carolina Coeporation Code 

name, after the insertion of the payee's name ai^bnowledgea the same to be 
hia, it is valid and the maker ib Uable thereon. — Wester v. Bailey, IIS N. C. 
l»3, 24 S. E. 9. 

333. Delivery necessary; when effectual; when presnmed. 

Every contract on a negotiable instrument is incomplete and re- 
vocable until delivery of the instrument for the purpose of giving 
effect thereto. Aa between immediate parties, and as regards a 
remote party other than a holder in due course, the delivery 
in order to be effectual must be made either by or under the au- 
thority of the party making, drawing or indorsing, as the case 
may be ; and in such case the delivery may be shown to have been 
conditional or for a special purpose only, and not for the purpose 
of transferring the property in the instrument. But where the 
instrument is in the hands of a holder in due course a valid de- 
livery thereof by all parties prior to him, so as to make them liable 
to him, is conclusively presumed. And where the instrument is 
no longer in possession of a party whose signature appears 
thereon, a valid and intentional delivery by him is presumed until 
the contrary is proved. 

C. 8., a. 2097; Bev., b. 2166; 1899, c. 733, s. 16. 

BUla Mid NotM $208. An instrument payable to bearer can be nego- 
tiated by delivery and consequently no endorsement v required. Tyson v. 
Joyner, 139 N. C. 69, 51 S. E. 803. 

Bills and Notes g 209. A note may be transferred by delivery and with- 
ODt indorsement, and, though such transfer does not pass the legal title 
according to the law mercliant, the transferee is tlie equitable assignee 
thereof. — Jenkins v. Wilkinson, 113 N. C. 532, 18 a. E. 696. 

384. OonBtrnotion, irtxere uutrument is ambi^fuons. Where the 
language of the instrument is ambiguous or there are omissions 
therein, the following rules of construction apply : 

1. Where. the sum payable is expressed in. words and also in 
figures and there is a discrepancy between the two, the sum de- 
noted by the words is the sum payable; but it the words are am- 
biguous or uncertain, reference may be had to the figures to fix 
the amount. 

2. Where the instrument provides for the payment of interest, 
without specifying the date from which interest is to run, the 
interest runs from the date of the instrimient, and if the instru- 
ment is undated, from the issue thereof. 

Bills and Notos g 16B. A note with a blank for rate of interest is neg;0' 
liable. Franklin Natl. Bank v. BoberU Bros. Co., 168 N. C. 47S, 84 S. E. 
706. 

Intoreit |39. A note, given life insurer for Brat premium on policy, 
which specified it bore interest at rate of 6 per cent, bore interest from date. 
—Owens V. North State Life Ins. Co., 173 N. C. 373,. 92 S. £.^68. , 



North Cabolina Corporation Code 193 

A note Teeiting thut it is payable "with legal interest" beari iutereaf 
from its date. — Gfaolson v. King, 79 N. C. 162. 

3. Where the iDstrument is not dated it will be considered to 
be dated as of the time it was issued. 

4. "Where there is conflict between the written and printed pro- 
visions of the instrument the written provisions prevail. 

5. Where the instrument is so ambi^ous that there is doubt 
whether it is a bill or a note the holder may treat it as either 
at his election. 

6. Where a signature is so placed upon the instrument that it 
is not clear in what capacity the person making the same intended 
to sign, he is to be deemed an indorser. 

7. Where an instmment containing the words "I promise to 
pay" id signed by two or more persons, they are deemed to be 
jointly and severally liable thereon. 

.C. 8., s. 2998; Bev., ss. 1952, 2341; 1899, c. 733, s. 17. 

336. Signatture most appear; trade or assumed name. No per- 
son is liable on the instrument whose signature does not appear 
thereon, except as herein otherwise expressly provided. But one 
who signs in a trade or assumed name will be liable to the same 
extent aa if he had signed in his own name. 

C. a, a. 2999; Rev., s. 2167; 1899, c. 733, s. 18. 

BUlB and NotM gl21. One who signs in form and appearance aa a 
principal and maker of a note is bound aa such to all persons who subse- 
qaently deal with the paper without knowledge of his true relation to it. — 
Citizens Natl. Bank of Durham v. Burch, 145 N. C. 317, 59 8. E. 71. 

Bills «nd Notes § 121. Persons who sign a note as obligors are bound 
by the atipalationa contained therein whether their names appear in the 
body of the instrument itself or not. — Howell v. Parsons, 89 N. C. 230. 

336. Signature by agent; bow authority shown. The signature 
of any party may be made by a duly authorized agent. No par- 
ticular form of appointment is necessary for this purpose, and the 
authority of the agent may be established as in other cases of 
agency. 

C. 8., s. 3000; Bev., s. 2168; 1899, c. 733, s. 19. 

Bills and Notes g 623. An indorsement may be made by an agent duly 
snthorized.— Uidgette v. Basnight, 175 N. C. 18, 91 8. E. 353. 

Principal and Agant B19. The authority to draw, accept or indorse 
bills, notes and checks will not readily be implied aa an incident to the ex- 
press authority of an agent. It must ordinarily be conferred expressly, but 
it may be implied if the exeention of the paper is a necessary Lneideut to the 
basinesB, that is, if the purpose of the agency cannot otherwise be accom- 
plished. — Bank of Morgauton v. Hay, 143 N. C. 326, 55 S. E. 811. ,^, .,.[,> 



194 North Carolina Corporation Code 

337. Liability of person signing as agent. Where the instru- 
meut contains, op a person adds to his signature, words indicat- 
ing that he signed for or on behalf of the principal or in a repre- 
sentative capacity, he is riot liable on the instrument if he was 
duly authorized; but the mere addition of words describing him 
as an agent or as filling a representative character, without disclos- 
ing his principal, does not exempt him from personal liability. 

C. a., 3. 3001; Rev., s. 2169; 1899, c. 733, b. 20. 

338. Effect of signature by procuration. A signature by pro- 
curation operates as notice that the agent has but a limited au- 
thority to sign, and the principal is bound only in case the agent 
so signing acted within the actnal limits of hia authority. 

C, S., B. 3002; Eev., a. 2170; 1899, c. 733, 8. 21. 

AUoroer and OU«nt g 81. An attorney to whom a note ia sent for col- 
leetion ban no authority to indorse the same in the name of his client. — 
Sherrill v. Weisiger Clothing Co., IH N. C. 436, 19 S. E. 365. 

339. Effect of forged signature. When a signature is forged 

OP made without the authority of the person whose signature it 
purports to be, it is wholly inoperative, and no right to retain the 
instrument or to give a discharge therefor or to enforce payment 
thereof against any party thereto can be acquired through op 
undep such signature, unless the party against whom it is sought 
to enforce such right is precluded from setting up the forgery 
or want of authority. 

C. S., 8. 3003; Bev., b. 2171; 1899, c. 733, b. 23. 

Banks and Banking g 14B. A bank with whii-li a pi^rsou hiiB a doposjt 
aBBomeB responaibility foi the erroneous pnyment of any chetk not drawn 
or authorized by the depositor. — Bank of Brunswick v. Thompson, 174 N. C. 
S49, 93 S. E. 849; State Bank v. Cumberlnnd Savings & Trust Co., 168 N. C. 
605, 85 S, E. 5; Tarborough v. Banking Loan & Trust Co., 142 N, C. 377. 55 



ART. 3. CONSIDERATION. 

340. Presumption of consideration. Every negotiable instrti- 
ment is deemed prima facie to have been issued for a valuable 
consideration, and every person whose signature appears thereon 
to have become a party thereto for value. 

C. S., 8. 3004; Rev., 8. 2172; 1899, <■. 733, a. 24. 

Bills and Notes §90. A note under seal does not rerjuiri' ;i canaideratioii, 
beeauae the seal itself imports one.— Burris v. Starr, 16.1 N. C. 657, 81 
8. E. 929. 

BlllB Uld Notes §493. Note under seal purports consideration, but aui-h 
presumption is rebuttable as between parties. — Farrington v. McNeill, 174 
N. C. 420, 93 S. E. 957. 

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North Cabolina Corporation Code 195 

BlUa and Notes S493. A sealed note needs no consideration to support 
it.— Wester v. Bailey, 118 N. C. 193, 24 8. E. 9; Finer v. Brittain, 165 N. 0. 
401, 81 S. E. 462; Columbian Cooeervatory of Mnsie t. Dickinson, 158 N. Q. 

207, 73 S- B. 980. 

341. Whkt conatitates consideration. Value is any considera- 
tion sufficient to support a simple contract. An antecedent or 
pre-existing debt constitutes value, and is deemed such whether 
the instrument is payable on demand or at a future time. 

C. S., s. 3005; Hev., s. 2173; 1899, c. 733, b. 25. 

Bills and Notes §92. A note embodying a )iromiBO to pny what oae is 
already obligated to pay is supported by n good ponaidcrntiou in tho im- 
plied agreement of the promisee to suspend his remedv nntil the maturity 
of the note.— Cherokee County v. Meroney, T73 N. C. H53, 92 S, E. 619. 

BUl5 and Notes 93. The release of tbe dra-n-er of an order is a sufficient 
(onsideration for an acceptance of the order.^Cr.iig ft Wilson v. Stewart & 
Jones, 163 N. C. 531, 79 S. E. 1100. 

Bills and NotM g 95. One promiaaory note is a good eonsideratioii for 
another given in exchange. — Franklin Natl. Bank v. Roberts Bros. Co., 168 
N. C. 473, 84 S. E. 706. 

Bills and Notes §188. Where a note was transferred for a debt of the 
payee, the consideration sustained the transfer, and an instrnetion that 
there was no evidence of consideration was erroneous. — American Exeh. 
Nati. Bank v. SeagroTes, 166 N. C. 608, 82 8. E. 947. 

Bills and Notes 92. The release by a wife of her right of dower involved 
in signing mortgages for $50,000 is a valuable consideration for a note for 
«5,000 executed bv her husband to her.— .Southern Loan & Trust Co. v. 
Benbow, 135 N. C. 303, 47 S, E. 43r>. 



Bills and Notes §92. The forbearance to enforce the payment of n prior 
debt is sufficient consideration to fix the liability of the defendant on the 
renewal note.—Bank of New Hanover v. Bridgera, 98 N. C. 67, 3 S. E. 826; 
Johnson v. Rodeger, 119 N. C. 446, 25 8. E. 1021; Murchison Katl. Bank v, 
Donn Oil Mills Co., 150 N. C. 718, 64 S. B. 885. 

342. What constitutes aliolder for value. Where value has at 
any time been given for the instrument the holder is deemed a 
holder for value in respect to all parties who became such prior 
to that time. 

C. S., a. 3006; Rev., s. 2174; 1899, e. 733, s. 26. 

Bills and Notes §626. A bank which introduced in evidence a draft in- 
dorsed to it and proved the indorsement, made a prima fiicie case that it 
was B purchaser, not a collecting agency. — Worth Co. v. International Sugar 
Feed Co., 172 N. C. 335, BO 8. E. 295. 

343. When lien on instamment constitutes holder for value. 
Where the holder has a lien on the instrument arising either 
from contract or by implication of law he is deemed a holder for 
value to the extent of his lien. 

C. 8., a. 3007; Rev., a. 2175; 1899, c. 733, s. 27. DiiizcdbCoC^Ic 



196 NoBTH Carolina Cobpoeation Coi« 

Bills and NotM g 36S. Persona taking notes for an antecedent debt or as 
collateral security ate bolders for value. — J. L, Smathers ft Co. v. Toxaway 
Hotel Co., 162 N. C. 346, 78 S. E. 3S4; Brooks v. SuUivan, 129 N. C. 190, 
39 8. E. 822. 

344. Effect of want of consideration. Absence or failure of 
consideratioQ is matter of defense as against any person not a 
holder in due course, and partial failure of consideration is a 
defense pro tanto, whether the failure is an ascertained and 
liquidated amount or otherwise. 

C. S., 8. 3,008; Bev., s. 2176; 1899, c. 733, a. 28. 



Bills and Notes g403. The burden is on the maker of a note to show 
want of consideration, — Columbian Conservatory of Music v. Dickinson, 158 
N. C. 207, 73 8. E. 990. 

Bills and Notes S 462. The absence of consideration for a negotiable 
instrument is a defense against any one not a holder in due course. — 
Hardy v. Mitchell, 156 N. C. 76, 72 8. E. 95. 

Bills and NotM §370. Failure of consideration of a note, unknown to 
its indorsee, does not affect riglit of recovery on a note given in renewal 
thereof, by the maker, directly to the indorsee, whereupon the original note 
was discharged and canceled. — American Nat. Bank of Richmond v. Hill, 
169 N. C. 235, 85 8. E. 209. 

34S. Liability of accommodation party. An accommodation 
party is one who has signed the instrument as maker, drawer, 
acceptor, or indorser without receiving value therefor, and for 
the purpose of lending his name to some other person. Such a 
person is liable on the instrument to a holder for value, notwith- 
standing such holder at the time of taking the instrument knew 
him to be only an accommodation party. 

C. S., a. 3009; Hev., s. 2177; 1899, c. 733, S..29. 

Bills and NotM g 495. If the paper is in fact accommodation paper then, 
notwithstanding its form, the drawer is primarily liable and not entitled 
to notice, but the burden of showing this is upon the holder. — National 
Bank of Aaheville v. Bradley, 117 N. C. 526, 23 S. E. 455. 

Bills and Notes § 256. Surrender of collateral deposited with the holder 
by the maker of a note to secure it, without the consent of an accommo- 
dation indorser, operates to release the indorser pro tanto. — Bank of Fay- 
ettoville v. Nimocks, 124 N. C. 352, 32 8. E. 717. 



corporation, which is the maker, and constitute a majority of the board of 
directors, does not deprive them of right to uotice of dishonor. — Houser v. 
Fayssonx, 168 N. C. 1, 83 S. E. 692. 

Principal and Surety g 116. Where plaintiffs either owning or having a. 
lien on vehicles in bankrupt's possession, the value of which largely ex- 
ceeded renewal notes given for the price on which defendants were auretiea. 



North Cabouna Corporation Code 197 

voluntarily discharged the lien and releaaed the vehicles to bankrupt's trus- 
tee, defendanta were discharged from liability on the notes. — Brown Car- 
riage Co. V. Dowd, 155 N. C. 307, 71 S. E. 721. 

Bills and Notes § 971. Defendants, by way of accommodation, signed a 
promissory note in blank, and delivered it to certain of the makers, who 
filled in their names as payees. Held that defendants were liable on the 
notes as against bona fide purchaser thereof for value. — Norfolk Natl. 
Bank v. Oriffln, 107 N. C. 173, 11 8. B. 1049. 

BsrtnsnlUp g 268. Where the surviving partner of a firm which had dis- 
eouuted a note indorsed by defendant as accommodation payee, for the 
benefit of the deceased partner as maker thereof, brings an action thereon, 
either as saeh partner or aa receiver of the firm, be must show that he has 
BOt in his hands sufBciont assets of tha firm to pay its debts, and leave 
enough of a sarplus to which the deceased partner's estate would be en- 
titled to pay the note. — Fatten v. Carr, 117 N. C. 176, 23 8. E. 182. 

BlUa and Hotoa g ESS. In an action on a note, an issue whether defend- 
ant was an accommodation indorser and surety was irrelevant, where any 
indorser could be sued without joining the maker or other surety. — State 
Bank of Chicago v. Carr, 130 N. C. 479, 41 8. E. 876. 

ART. 4. NEGOTIATIONS. 

346. What constitutes negotiation. An instrument is nego- 
tiated wheD it is transferred from one person to another in such 
manner as to constitute the transferee the holder thereof. If 
payable to bearer, it is negotiated by delivery ; if payable to order, 
it is negotiated by the indorsement of the holder, and completed 
by delivery, 

C. 8., 8. 3010; Bev., s. 2178j 1890, c. 733, s. 30. 

BUlB and Hotas B361. A transferee of notes and mortgages after matu- 
rity holds them subject to any defenses existing against the transferor. — 
Wilkina-Eicks Co. v. Welch, 179 N. C. 266, 103 8. E. 316. 

Bills and Notes §g 214, 330. An indorsement written on a note payable to 
order, but not signed by the payee, or by any one in bis behalf, does not 
make the transferee of the note a holder in due course, but gives him only 
an equitable title thereto. — Critcher v. BaUard, 180 N. C. Ill, 104 S. E. 134. 

Bills and Notes g 330. Negotiation of a note by delivery without indorse- 
ment passes only the equitable title and will not give the transferee title 
free from defenses good against the payee. — Elgin City Banking Co. v. 
UcEachem, 163 N. C. 333, 79 8. E. 680. 

Bills and Notes §209. Where a note was payable to a certain person 
or order, its indorsement was necessary to transfer title. — Myers v. Petty, 
153 N. C. 462, 69 8. E. 417. 

Bills and Notes g 330. To make onf 
ttable note payable to order, it must 
v. Pinley, 153 N. C. 497, 69 8. E. o02. 

Bills and Notes 8471. An allegation in the answer in an action on a 
note, denying its indorsement, does not rebut the presumption raised by 
law that the holder is the rightful owner of the note. — Ibid. 

Bills and Notes gSSO. The holder of a draft payable to order, in the 
absence of'proof of indorsement by the payee, was not a bona fide pur- i 



198 North Caeolina- Corporation Code 

chaser for value without notice— Mayers v. McKimnion, 140 N. 0. 840, 53 

Bills and Notes §330. The transfer nithout iudorBUiiicut of a negotiable 
instrument payable to order does not pass the legal title, and hence the 
transferee is not a bona fide holder.— Br ei?«e v. Crumpton, 121 N. C. 122, 
28 S. E. 351. 

347. How indorsement made. The indorsement must be written 
on the instrument itself or upon a paper attached thereto. The 
signature of the indorser, without additional words, ia a suffi- 
cient indorsement. 

C. S., a. 3011; Rev., s. 3179; 1899, c. 733, s. 31. 

Bills and Notes §330. To be valid and constitute the iudorBce a holder 
in due course, a paper bearing indorsements ninst be attached phvsicallv to 
the note.— Commercial Seenritv Co. v. Mnin Street Pharmacv, 174 N. C. 655, 
94 S. E. 298. 

Bills and Notes §287. The placing of the name of the payee of a draft 
on the back thereof with a rubber stamp, by a person having authority to 
do BO, and with intent to indorse the instrument, constitutes a valid in- 
dorsement .-Mayers V. McRimmou, 140 N. C. 640, .53 S. E. 447. 

Evidence §403. Where a wife, the owner of a note, and her husband, 
indorse it to another, the indorsement mav be explained as between the 
immediate parties,- Coffin v. Smith, 128 N. 0. 2-=52, 3S 8. E. 864. 

348. Effect of indorsement by infant or corporation. The in- 
durseinent or assignment of the instrument by a corporation, an 
infant, or married woman passes the property therein, notwith- 
standing that from want of capacity the corporation, infant, or 
married woman may incur no liability thereon. 

0. 8., B. 3012; Eov., s. 2180; 1899, c. 733, s. 22. 

349. Indorsement mnst be of entire instrument. An indorse- 
ment must be an indorsement of the entire instrument. An in- 
dorsement which purports to transfer to the indorsee a part only 
of the amount payable or which purports to transfer the instru- 
ment to two or more indorsees severally, does not operate ae & 
negotiation of the instrument. But where the instrument has been 
paid in part it may be indorsed as to the residue. 

C. S., B. 3013; Rev., a. 2181; I8S9, e. 733, a 32. 

360. Kinds of indorsement. An indorsement may be either iu 
blank or special, and it may also be either restrictive or qualified 
or conditional. 

C. a., s. 3014; Rev., g. 2182; 1899, c. 733, s. 33. 

3S1. Special indors^nent; indorsement in blank. A special 
indorsement specifies the person to whom or to whose order the 
nstrument is to be payable; and the indorsement of such indorsee 
ia necessary to the further negotiation of the ins^ument. An 

DiyilzcdbvCjOO^Ic 



North Carolina Corporation Code 199 

indorsement in blank specifies no indorsee, and an instrument 
80 indorsed is payable to bearer and may be negotiated by 
delivery. 

C. 8. a. 3015; Rev., b. 2183; 1899, c. 733, s. 31. 

BU1« and Notes % 330. A note payable to order mast be specially indorsed 
by the payee (and prior indoraeea, if any) to the holder or at least in blank 
to make him its legal owner and the bona fide holder of a title good 
against prior equities of which he is not shown to have had notice. — Tyson 
V. Joyncr, 13» N. C. 69, 51 8. E. 803. 

Bill! and Notos §330. Where a note is indorsed in blank, the holder 
baa the authority to make it payable to himself or to any other person 
by filling up the blank over the signature, and this may be done at, or be- 
fore, the trial. — Ibid. 

Bills and Notu g 330. The presumption is, nothing elao appearing, that 
the indorsement In blank of a note by the payee constitutes a tranater of 
the note to the indorser; but the indorsement is subject to explanation aa 
between the immediate parties.— <;offln v. Smith, 128 N. C. 252, 3H 8. E. 
864. 

Bills and Notes g 4fl7. Holder of note indorsed in blank presnmably 
took it for value, without notice of outstanding equities. — QuU States Steel 
Co. V. Ford, 173 N. C. 195, 91 8. E. 841. 

Bills and Notes § 497. It is error to place on an indorsee, who has proved 
the indorsement, the burden of proving that he is a bona fide purchaser; 
there being no evidence that his title is defective. — Moon v. Simpson, 170 
N. C. 335, 87 8. E. 118. 

Bills and NotM §406. Except in ease of instruments payable to bearer, 
to make one a holder in due course of a negotiable instrument, the burden 
is npon the indorsee to prov« indorsement to him, if it be denied. — Park v. 
Bium, 156 N. C. 228, 72 8. E. 309. 

Bills and Not«s §497. - Where the maker of a note alleges fraud in Its In- 
ception, the bolder has the burden of proving that be was an indorsee for 
value before maturity nnd without knowledge of the fraud. — Chad*ick v, 
Kirkman, 159 N. C. 259, 74 8. E. 968. 

Bills and Notos §188. The rule that n holder of a note mny HII up a 
blank indorsement by making it payable to himself or some one else applies 
only where he obtains the note, not from the paj'eo or a prior indorser, but 
as a bona fide purchaser, without any knowledge or notice of thp relation 
flustained by prior indoraers to the note.— Adrian v. Mc'.Caskill, 103 N. C. 182, 
,9 S. E. 28.4. 

352. How blank indorsanent chan^d to special indorBement. 

The holder may convert a blank indorsement into a special in- 
dorsement by writing over the signature of the indorser in blank 
any contract consistent with the character of the indorsement. 

C. S., 8. 3018; Rev., e. 2184; 1899, c. 733, s. S5. 

Bills and Notes §330. Where a note is indorsed in blank, the holder has 
the authority to make it payable to hiroacit or to any other person by 
Elling up the blank over the signature, and this may be done at, or before, 
the trial.— Tyson v. Joyner, 139 N. C. 69, 51 S. E. 803. 



Bills and Notes § 330. But lie is not at liberty to write 



•>ttglc 



200 North Carolina Coeporation Code 

indorsement an; words which shall change the liabilitj' created by Uw 
upon the indorser, or at least none which shall not be in exact conformity 
to the agreement under which the indoraement was made by the indoraer 

to the indorsee. — Lilly v. Baker, 8S N. C. 151. 

353. When indorsement restrictiTe. An indorsement is re- 
strictive which either (1) prohibits the further negotiation of 
the instrument; or (2) constitutes the indorsee the agent of the 
indoraer; or (3) vests the title in the indorsee in trust for, or to 
the use of, some other person. But the mere absence of words 
implying power to negotiate does not make an indorsement 
restrictive, 

C. S., B. 3017; Eev., s. 2185; 1899, e. 733, s. 36. 

Bsnks ft Banking gl56. Where note, payable at maker's bank of de- 
posit, was sent to such bank for collection, the bank was the agent of the 
payee.— Peaalee-aaulbert Co. v. Dixon, 172 N. C. 411, 90 8. E. 421. 

Banks ft Bauklng § 156. A bank which discounts a depositor's drafts un- 
der an agreement that if they are returned unpaid they shall be chafed 
back to his account and returned to him, is merely an agent for collection. — 
Latham v. Spragins, 162 N. C. 404, 78 8. E. 282. 

Bills and Notes §290. A draft or bill transferred to a bank by restrict- 
ive endorsement as "for deposit" or "for collection, " is taken and held 
by the bank as agent for the indorser. Murchison Natl. Bank v. Dunn Oil 
Mills Co., 150 N. C. 718> 64 8. E. 885. 

BlUs and Notes S290. When a bank to which a draft, appearing on its 
face to be negotinble, is forwarded by another bank, purchases it for value, 
withont notice of an agreement restrieting its negottation, the dnwn 
may not atop payment of the draft as against the rights of the bank so hold- 
ing the paper. — Ibid. 

BlUs and Notes §281. Where a payee or regular indorser of a note 
writes his name on the back, the law, as between him and a bona fide 
holder for value and without notice, implies that he intended to aasome the 
liability of an indorser.— Sj-kes v. Everett, 167 N. C. 600, 83 S. B, 585. 

Bills aad Notes §491. The burden of proof ia upon an indorser to BhoW 
any agreement limiting his liability. — Davidson v. Powell, 114 N. 0. 576, 
19 S. E. 601. 

Banks ft Banking §159. A negotiable instrument deposited in a bank 
indorsed "toi collection" remains tlie propertr of the depoBltor.^-Anu>tir 
Packing Co, v. Davia, 118 N. C. 518, 24 S. E, 365, 

Banks ft Banking §169, The restrictive indorsement "for collection" 
was notice to the bank that plaintiff was the owner of the draft and the 
forwarding bank was only an agent. — Boykin Seddon & Co. v. Bank of 
Payetteville, 118 N. C. 666, 24 8. B. »S7. 

354. Effect of restrictive indorsement; rights of indorsee. A 
restrictive indorsement confers upon the indorsee the right (1) 
to receive payment of the instrument; (2) to bring any action 
thereon that the indorser could bring; (3) to transfer his rights 
as such indorsee, where the form of the indorsement authorizes 



North Cabolina CwtPORATioN Code 201 

him to do so. But all subsequent indorsees acquire only the title 
of the first indorsee under the restrictive indorsement. 

C. 8., 8. 301B; Bev., s. 2186; 1899, c. TS3, b. 37. 

BlOkB Mid BuiUmg g691. The reetrictive indorsement "for collsction" 
u Dotice to the bank that the forwarding bank waa only an agent and pre- 
vents transfer of title.— Boykin Seddon 4 Co. v. Bank of Fayetteville, 118 
N. C, 566, 24 8. E. 357. 

PrUictpal And Agent g 183. An agent designated as payee of a note is not 
entitled to aae thereon in his own name, except upon proof that the note 
was made payable to him with the consent of his principal; the burden of 
proving such fact being on him. — Martin & Garrett v. Mask, 158 N. C. 
436, 74 3. E. 343. 

One who holds a negotiable note as collateral for the payment of a debt 
may maintain an action thereon in his own name, but not one who holds 
"for collection," for the latter ia not "the party in interest." — Third 
Natl. Bank of St. Louis v. Ezum, 163 N. C. 199, 79 S. E. 49S. 

356. Qualified indorsement. A qualified indorsement consti- 
tutes the indorser a mere assignor of the title to the instrument. 
It may be made by adding to the indorser'a signature the words 
"without recourse" or any words of similar import. Such an 
indorsement does not impair the negotiable character of the in- 
strnment. 

C. 8., s. 3019; Rev., a. 2187; 1899, c. 733, s. 38. 

Bills and NotM g 190. An indorsee of a negotiable instrument is not de- 
prired of the position aa holder in due course by the fact, and that alone, 
that said indorsement is in form "without recourse." — Bank of Sampson 
T. Hatcher, 151 N. G. 359, 66 S. E. 308. 

Bills and NotM § 190. An indorsee on a note, under an indorsement ro- 
eitiag that the indcrser transfers his right and title to the indorsee named, 
is a holder in due course, though the indorser is liable on specified warrau- 
tieB.~Evan8 v. Freeman, 143 N. C. 61, 54 8. E. 847. 

BUls and NotM B IBO. The eipression ' ' without recourse ' ' does not throw 
any suspicion on the paper, or affect the bona fide character of a purchaser, 
although it may be evidence that value was not received by the indorser. 
Neither will such addition affect the negotiability of the instrument. — Mer- 
chants National Bank v, Branson, 165 N. C. 344, 81 S. E. 410. 

Bills knd NotM % 190. If the payee of a note intends to transfer the title 
only he should use the words "without recourse" or other phrase of similar 
import.~DavidBon v. Powell, 114 N. C. 575, 19 8. E. 601. 

366. Conditional indorsement. Where an indorsement is con- - 
ditional, a party required to pay the instrument may disregard 
the condition and make payment to the indorsee or his transferee, 
whether the condition has been fulfilled or not. But any person to 
whom an instrument so indorsed is negotiated will hold the same 
or the proceeds thereof subject to the rights of the person in- 

, dorsing conditionally. 

j C. B., B. 3030; Bev. s. 2168; 1899, c. 733, a. 39. DiyiizcdbvCjOO^IC 



202 NOBTH CaBOUNA CORPOBATION CoDB 

357. Indorsement of instrument payable to bearer. Where sd 
instrument payable to bearer is indorsed specially, it may never- 
theless be further negotiated by delivery; but the person indors- 
ing specially is liable as indorser to only such holders as make 
title through his indorsement. 

C. S., 8. 3021; Hov., s. 2189; 1899, e. 733, - 40. 

358. Indorsement of instniment payable to two or m<n« persons. 
Where an instrument is payable to the order of two or more 
payees or indorsees who are not partners, all must indorse unless 
the one indorsing has authority '•> indorse for the others. 

C. S., B. 3022; Bev., b. 2190; 1899, c. 733, s. 41. 

BUlB and Notw g 242. A survivlug partuer has no power aftrr diaaolu 

tioD to reti«w or imlorsu a fiiiii note iu tlie iinuie of the Stm. And if lie 

doex so, he becomes individually tiablc on such indorsement, tliough it did 

■ not biud tLe iirm, — is'atl. Bank ot Maryland v. Ho Dings worth, 136 N. C. 

556, 55 8. E. 809. 

359. Effect of instrumrat drawn or indorsed to a person aa 
cashier. Where an instrument is drawn or indorsed to a person 
as cashier or other fiscal officer of a bank or corporation it is 
deemed prima facie to be payable to the bank or corporation of 
which he is such officer, and may be negotiated by either the in- 
dorsement of the bank or corporation or the indorsement of the 
officer. 

C, S., s. 3023; Rev., a. 2191; 1899, v. 733, a. 42. 

360. Indorsement, where payee's name misspelled. Where the 
name of a payee or indorsee is wrongly designated or misspelled 
lie may indorse the instrument as there described, adding, if he 
think fit, his proper signature. 

C. 8., 8. 3024; Rev., b. 2192; 1899, e. 733, s. 43. 

361. Indorsement in representative capacity. Where any per- 
son is under obligation to indorse in a representative capacity 
he may indorse in such terms as to negative personal liability. 

C. 8., 8. 3025; Rov., s. 2193; 1899, c. 733, b. 44. 

Bills and Notes g 123. Contracting parties arc not prohibited from in 
Sfirtiiig in a written agreement a provision that an implitation, whicli th«! 
law would otherwise raise, shall not arise; therefore, while an executrix 
who gives a note in her representative capacity for money borrowed to 
paj* debta of the estate is persountlj liable, nothing else appearing, yot 
when it is so signed, bnt in tbe body of the note are inserted the words 
"L. L. M., Executrix, etc., but not personallv," she is not personally liable. 
— Morehead Banking Co. v. Morohead, 116 N. C. 413, 21 S. E. 191. 

362. Presumption as to time of indorsement. Except where au 
indorsement bears date after the maturity of the instrument, 

DiclzedbyCoO^IC 



North Carolina Corporation Code 203 

every negotiation is deemed prima facie to have been effected be- 
fore the instrument was overdue. 

C. S., B. 3026; Bev., h. 2194; 1899, c. 733, a. 45. 

Bills and Notes g247. Indorsements in blank upon negotiable initru- 
ment are pieaumed to be made contemporaneoua with the execution of sueb 
■ ■ nt.— Southerlaud v. Fremont, 107 N. C. 565, 12 S. E. 237. 



363. Presiunption as to place of iadorsement. Except where 
the contrary appears, every indorsemeut is presumed prima facie 
to have been made at the place where the instrument is dated. 

C. 8., 8. 3027; Bev., s. 2195; 1899, e. 733, s. 46. 

364. Continoatitm of negotiable character. An iostrument ne- 
gotiable in its origin continues to be negotiable until it has heen 
restrictively indorsed or discharged by payment or otherwise. 

C. 8., B. 3028; Rev., a. 2196; 1899, c. 733, a. 47. 

366. Striking out indorsement. The holder may at any time 
strike out any indorsement which is not necessary to his title. 
The indorser whose indorsement is struck out and all indorscrs 
subsequent to him are thereby relieved from liability on the 
instrument. 

C. 8., a. 3029; Rev., b. 2197; 18S9, c. T33, a. 43. 

366. Effect of transfer without indorsement. Where the holder 
of an instrument payable to his order transfers it for value with- 
out indorsing it, the transfer vests in the transferee such title as 
the transferor had herein, and the transferee acquires in addi- 
tion the right to have the indorsement of the transferor. But for 
the purpose of determining whether the transferee is a bolder in 
due coarse, the negotiation takes effect as of the time when the in- 
dorsement is actually made. 

C. 8., B. 3030; Bev., b. 2198; 1S99, c 733, b. 4<>. 

Bills and Notes §§214, 330. An indorsement written ou a note payable 
to order, brt not signed by the payee, or by any one in bis behalf, jioes 
not niako the transferee of tlio note a holder in due course, but gives him 
onlv an equitable title thereto.— Critcher v. Ballard, 180 N. C. Ill, 104 S. E. 
134. 

Bills and NotM §330. Negotiation of a note by delivery without in- 
doraemetit pasaeB only equitable title and will not give the trnnaferee title 
free from defensea good against the payee. — Klgin Citv Banking Co. v. Mc- 
Eachem, 163 N. C. 333, 79 8, E, HSO. 

BillB and Notes §209. Whore n 
or ordor, its indorsement was nccpE 
153 N. C. 462, 69 S. E. 417. 

BiUi and Notes §330. To makp one a holder in due course of a nego- 
tiable note p.avnble to order, it niiiat have been indorsed to him. — WpQds v. 
Pinlej-, 153 N^ C. 497, 69 S. K. TiOi:. r,n,iz-d b,. C jOC^Ic 



204 North Cabolina Corpobation Code 

Bills and NotM ^330. The holder of a draft paynble to order, in the 
absence of proof of indoraement by the payee, was not a bona fide parebaB«i^ 
for value without notice.— Mayers v. McBimmoD, 140 N. C. 640, 53 S. E. 
447. 

Billa and Notes § 330. The transfer without indorsemeiit of a negotiable 
instrument payable to order does not pass the legal title, and hence tbe 
transferee is not a bona fide holder.— Breese v. Crampton, 121 N. C. 122, 28 
8. E. 3S1. 

Bills and Notes § 330. A note may be transferred by delivery and without 
indorsement, and, though such transfer does not pass the legal title accord- 
ing to the law merchant, the transferree is the equitable assignee thereof. — 
Jenkins t. Wilkinson, 113 N. C. 532, IS S. E. 696. 

367. When prior part; may segotiate instrument. Where an 
instrument is negotiated back to a prior party, such party may, 
subject to the provisions of this chapter, reissue and further 
negotiate the same. But he is not entitled to enforce payment 
thereof against any intervening party to whom he was personally 
liable. 

C. 8., H. 3031; Eev., s. 2199; 1899, c. 733, s. 50. 

Bills and Notes g 271. One who obtains possession of a note after indors- 
ing it is restored to his original position, and cannot, nor can sabsequeat 
purchasers from him with notice of the fact, hold intermediate iudoreers, 
who eoutd look to him again.— Adrian v. McCaskill, 103 N. C. 1S2, 9 S. E. 
284. 

ART. 5. RIGHTS OP HOLDER. 

368. "Bigbi, of holder to sue ; payment. The holder of a negotia- 
ble instrument may sue thereon in his own name, and payment 
to him in due course discharges the instrument. 

C. 8., s. 3032; Kev., s. 2300; 18S9, c. 733, s. 51. 

Bills and Notes §443. The holder in due course of a note indorsed to it 
as collateral security has the legal right to collect it, and may maintain an 
action thereon against the maker; it u»t appearing the indorser's debt haa 
been paid.— American Natl. Bank v. Hilt, 169 N. C. 235, 85 S. E. 209. 

Bills and Notes % 443. Suit on a note must be brought by the real party 
in iaterest.- Roller v. McKinney, 159 N. C. 319, 74 S. E. 966. 

Bills and Notes §443. Where plaiutiS sued on a note as equitable owner 
and produced the note, it was entitled to recover as the holder subject to 
any defenses which the maker might have against the original payee. — 
Johnston County Sav. Bank v. Scroggin Drug Co., 152 N. C. J42, 67 8. E. 
253. 

Bills and Notes §143. An assignee of a non-negotiable note ia the 
proper person to sue thereon in his own name as the real party in iaterest. — 
Thompson v. Osborne, 152 N. C. 408, 67 8. E. 351. 

Bills and Notes §443. The assignee of a negotiable note endorsed by 
the clerk of the payee without authority is simply the holder of unindorsed 
paper, and as such has, prima facie, the equitable title and can maintain 
an action thereon.— Breese v. Crumpton, 121 N. C. 12B, 28 3. E. 351, 

Bills and Notes §496. Bills, bonds and promissory notes, and all other 



North Cabolina CcmpoBATiOM Code 205 

evidence of debt, although payable to order and not indoned, ma; bo given 
na donations canea raortie, and the donee may sue on them in hie own 
name. — Eiff v. Weaver, 94 N. C. 374. 

369. What constitnteB holder in due oonne. A holder in due 
course is a bolder who has taken the instnimeDt under the follow- 
ing conditions: (1) That the instrument is complete and regular 
upOD its face; (2) that he became the holder of it before it was 
overdue and without notice that it has been previously dishonored, 
if such was the fact ; (3) that he took it for good faith and value ; 
(4) that at the time it was negotiated to him he had no notice 
of any infirmity in the instrument or defect in the title of the 
person negotiating it. 

C. S^ a. 3033; Bev., a. 2301; IS99, c. 733, e. 52. 

BlUs and Hotel g 407. The law bearing upon negotiable instruments, as 
to when a holder of a note ia one in "due courae" has been well settled 
by the leading case of American National Bank v. Fountain, 148 N. C. 
590, 62 S. E. 738, in a well considered opinion by Mr. Justice Hoke, which 
ha? been frequently pited and approved. In that case it is held; "When it 
is shown tbat a negotiable instrument sued on has been procured by fraud, 
or there is evidence tending to establish it, it ia neceaeary for a recovery by 
one claiming to be the holder in due eonrae to show by the greater weight 
of the evidence that he acquired the title (1)' before maturity; (2) in good 
faith for value; (3) without notice of any infirmity or defect in the title of 
the person negotiating it." — Kaleigh Banking & Trust Co. v. Clark, 172 
N. C. 26S, 90 a. E. 200. 

Bills and Notes §497. Our statute on negotiable inatrumenta, aa applied 
and construed in several recent decisiona of the Court, ia to the effect that 
in order to establish the position of holder in due course, when required to 
shut off counterclaims and defenses otherwise available, it must be shown 
that the instrument is complete and regular on its face and that title there- 
to was acquired in good faith and for value before maturity and without 
knowledge or notice of fraud or other impeaching circumstance, and, ex- 
cept in case of instruments pavable to bearer, when the indorsement is 
denied, the same must be proved.— Park v. Exum, 156 N. C. 22M, 72 S. E. 
309. 

Myers v. Petty, 153 N, C. 462, 69 8. E. 417. 

Mayers v. McBimmon, 140 N. C. 640, 53 8. E. 447. 

Tyaon v. Joyner, 139 N. C. 69, 51 8. E. 803. 

BU1> and Notes §497. In the absence of a plea of fraud in the transfer 
of a note, the trausferee would be presumed to be a bolder in due course 
without proving it. — American Ezch. Natl. Bank v. Seagrovee, 166 N. C. 
60S, 82 3. E. 947. 

Bills and Notes g 497. When the maker of a note offers evideuce of fraud 
of the payee in obtaining its execution or other inarmity, the prima facie 
ease of an indorsee before maturity that be took without notice ia so f;^ 
rebutted as to shift the burden on him to show that he is a bona fide 
bolder.— Standard Trust Co. v. Commercial Natl. Bank, 167 N. C. 200, 
83 S. E. 474. 



sdbyCoO^Ic 



North Carolina Corporation Code 



»1 S. E. 993. 

Fidelity Trust Co. v. Whitehead, 1B5 N. 0. 74, 80 S. E. 1065. 

Mercliaiita Xatl. Bank of Indianapolis v. Brnnaou, 165 N. C. 344, 81 S. K. 
410. 

J. L. Siiinthers & Co. v. Tozanay Hotel Co., IU8 K. C. ti9, 84 S. E. 47. 

Bills and MotM §351. A transferee of notes and inortgagaa aftirr uiu- 
turity Lolds tiicni subject to any dofenaos eiiating agaiust the traiiBferor. — 
Wilkitis-Ricks Co. v. Welch, 179 N. C. 266, 102 S. E; 316. 

Bills and Notes §g 214, 330. An indorsement written on a note paynbic 
to order, but not signed by the payee, or by any one in hia behalf, does 
not make the transferee of tlie note a holder in due course, but giveu him 
only an equitable title thereto. — Critcher v. Ballard, 180 N'. C. Ill, 104 
S. E. 134. 

BQlfl and Notes §337. A purchaser of n negotiable inatrument in duo 
course before maturity does not have notice of wiuities, merely because Jie 
knows facta whi^h would put a reasonably prudent man on inquiry whieli 
would result in ascertaining the equities. — Ibid. 

Banks and Banking gl65. A bank acquiring in due course a drnft for 
price of goods, with bill of lading attached, is the owner thereof, and the 
proceeds in the possession of another bank collecting the draft ciinuot be 
attached as the property of the seller; but, where the bank merely took 
the draft and bill of lading as a collecting agent, it acquires no property 
right in protceds.— Elm City Lumber to. v. Childerhoac & I'ratt, 167 .V. C 
34, 83 S. E. 22. 

Bills and Notes §330. An indoraei' of a negotiable instrument is not de- 
prived of the position as holder in due course by the fact, and that alone, 
that said indorsement is in form "without recourse. "—Bank of Siimpaon 
V. Hatcher, 151 K. C. 359, 66 S. E. 308. 

Bills and Notes g330. Where a note was jKiyable to a certain person 
or order, ita indorsement was necpssarv to transfer title. — Mvcrs v. Pettv, 
153 N. C. 462, 69 S. E. 417. 

Bills and Notes §330. The holder of a draft, payable to order, in the 
absence of proof of indorsement bv the pavee, was uot a bona fide purchaser 
for value without notice,— Mayers v. Mcttimmon, 140 N. C. 640, 53 S. E. 447. 

Bills and Notes § 330. The transfer without indorsement of a nego- 
tiable instrument payable to order does uot pass tlie legal title, and hence 
the transferee is not a bona iide holder.— Br eese v. Crumpton, 121 N. C. 
122, 28 S. E. 351. 

Bills and Notes §351. Where purchase money notes secured by deed 
of truat, under which a purchaser of the notes proposed to sell the lands 
so incumbered, were past due at the time of his purchase, he look them 
subject to any equities and defeunes existing in favor of the hind pur- 
chaser against the vendor, such as the latter's agreement that prior liens 
created by deeds of trust to secure notes executed by him should be die- 
fhargi'd before the purchase money notes should be valid obligations, and in 
such case the purchaser of the notes might be restrained from exercisinn 
the iwwer of sale in the trust deed.- Guthrie v. Moore, 183 N. C. 10, 108 
8. E. 334. 

that a note for a gambling debt 
luits by an innoceut indorsee lor 



sdbyCoOt^IC 



N(STH Cakouna Cobforatiom Codb 207 

vahie uid boldeT in due course, agaiDBt the iodorser on his contract of 
iitdaTMment, which is by virtue o( C. 3. 3047, a contract independent of 
the iMtmment on which it appears, and guarantees that the note is a valid 
ud gubsisting obligation.— Wachovia Bank & Trust Co. v. Grafton, 181 
N. C. 404, 107 S. E. 816. 

370. When person not deemed holder in due course. Where 
an instniinent payable on demand is negotiated an unreasonable 
length of time after its issue, the holder is not deemed a holder 
in due course. 

C. 8., B. 3034; Bev., a, 2202; 1899, c. 733, b. 53. 

Bills and Notw 6348. In determining what is a reasonable or unreanon- 
tbis time, regard is to bs had to the nature of the instrument iind the 
bets of the particular ease; and where a party obtained a cashier's check 
Irom a bank in this state and negotiated the same to a party residing in 
Vireinia in five days thereafter, such negotiation t 
tinie.-Singcr Mfg. Co. v. Si ' *' " -^ "■■' 

371. Notice before full amount paid. Where the transferee 
bas received notice of any infirmity in the instnunent or defect 
in the title of the person negotiating the same before be has paid 
the full amount agreed to be paid therefor, he will be deemed a 
holder in due course only to the extent of the amount theretofore 
paid by him. 

G. 8., B. 3035; Kev., a. 2203; IS6S, i'. 733, s. 54. 

Bills and Notes g 362. Where the original consideration of the paper is 
illegal or frandnlcnt, or it is taken as collateral security, the right of re- 
(Overy is restricted to the consideration .-ictually paid by the indorsee be- 
fore notice of the fraud, or the amount of the debt to which it is collat- 
eral.— I'. S. Nntl. Bank of X. Y. v. McXair, 116 X. C. 5r,0, 21 S. E. 3S9. 

3^. When title defective. The title of a person who nego- 
tiates an instrument i.s defective within the meaning of this 
chapter when he obtained" the instrument, or any signature 
thereto, by fraud, duress or force and fear or other unlawful 
laeaDs, or for an illegal consideration, or when he negotiates it in 
breach of faith or under such circumstances as amount to a fraud. 

C. 8.. B. 3036; Bev., s. 2!!04; 1899, c. 733, s. 5.1. 

Moon V. Simpson, 170 N. C. 335, 87 8. E. 118. 

Bills and Notes §361. The familiar general rule is that an indorsee of 
negotiable paper for value before maturity, without notice of auy infirmity. 
Like* it clear of all equities and defeusce between antecedent parties, and 
is, of coarse, entitled to recover the full amonnt of the same, aeeordinK to 
i(B tenor. Tlie eietptions to this rule are; 

(1) When by statute the paper is void in whole or in part from ita in- 
ception, as for naury. In Buch cases it ia void to the aame extent into 
•homaoever hands it may pass, even if ai'quired before maturity, for value 
Mi without uotice, and the sole remedy of the holder for the dfficioni-j- b 
against the indorscr. 

(2) Where the original conaideration of the p.iper is illegal or fraud- 
<ilent, or it is taken as collateral security, the right of recovorv ia restricted 

.,u:.dbX.oogIe 



208 NoBTH Carolina Corpoeation C(H>e 

to the consideration actuallj paid hj the indorsee before notice of the 

But the exception does not extend further, not oven to cases where the 
the note was issued without any consideration, thongh it maj be pnrchaaed 
by the indorsee for leas than its face value. — U, S. NatL Bank of N. T. t. 
McNair, 116 N. 0. 550, SI 8. E. 3S». 

373. Wliat constitates notice of defect. To constitute a notice 
of an infirmity in the instrument or defect in the title of the person 
negotiating the same the person to whom it is negotiated must 
have had actual knowledge of the infirmity or defect or knowledge 
of auch facts that his action in taking the instrument amounted 
to bad faith. 

C. S., s. 3037; Bev., b. 2305; 1899, o. 733, s. 56. 

Bills and NotM §337. A purchaser of a negotiable instiumeat in due 
course before maturity does not hare notice of equities, merely because he 
knows facts which would put a reasonably prudent man on inquirj' which 
would result in ascertaining the equities. — Critcber v. Ballard, 180 N. C. 
Ill, 140 S. E. 134. 

BlUs and Notes g S26. In an action by an indorsee of notes, evidence held 
to show that the indorsee was a bona fide purchaser for value without notice 
of any inflrniity.— Prankiin Nat. Bank v. Roberts Bros. Co., 168 N. C. 473, 
84 S. E. 706. 

Billa and Notm 8525. Where the plaintiff sues on a negotiable note, 
claiming to be a bolder in due course, and fraud in its execution is shown, 
the defendant may prove actual or constructive notice of fraud in rebuttal 
of the plaintiff's evidence, if he has offered sufficient proof to require it, 
or he may rely upon plaintiff's own evidence upon the issue as to whether 
he knew or should have known of it. — Merchants Nat. Bank v. Branson, 165 
N. C. 344, 81 S. E. 410. 

Bills and Not«a §626. Where fraud in the eKecutioc of a negotiable note 
has been shown, the burden of proof is on the plaintiff, an indorser thereof 
and claiming as a holder in due course, to -show not only that he acquired tbe 
paper for value before maturity, but also without notice of the infirmity of 
the instrument. — Ibid. 

Bllla and Notes §626. In an action on a note by an indorsee, evidence 
held insufficient to charge plaintiff with knowledge of any fraud in its in- 
ducement.— First Nat. Bank v. Brown, 160 N. C. 23, 75 S. E. 1086. 

BlllB and Notes §497. The burden was on the maker of a note, In a suit 
thereon by a purchi 
maker gave the not 
on by the maker, or acted in bad faith. — Ibid. 

Bills and Notes § 339. A holder of a note has notice of infirmity in the 
instrument or defect in the title of the person negotiating only when he has 
actual knowledge of the infirmity or defect, or the facts are such that the 
mere taking of the instrument amounts to bad faitb, and he cannot.be held 
to have notice of the facts which an inquirv would reveal. — J. L. Smathera 
& Co. V. Tojtaway Hotel Co., 162 N. C. 346, 78 8. E. 224. 

Bills and Notes % 332. A mala fide purchaser is made out only by proof 
of actual knowledge of the infirmity or defect or knowledge of such facts 
that the taking of the instrument amounted to bad faith. — Ibid. 



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NoETH Cabouna Corporation Code 209 

Bllla tJiA NotOB g 637. Whether holder of a note, negotiated hy one wbo 
participated in its execution in fraud of creditors, took it without notice 
of such fraud, held for the jury.— Ibid. 

Bills and Notes § 361. Where purchase money notes secured by deed 
of trust, under which a purchaser of the notes proposed to sell the iands 
so ineambered, were past due at the time of his purchase, he took them 
subject to any equities and defenses existing in favor of the land pur- 
chaser against the vendor, such as the latter's agreement that prior liens 
created by deeds of trust to secure notes executed by him should be dis. 
charged before the purchase money notes should be valid obligations, and 
in such case the purchaser of the notes might be restrained from exercising 
the power of sale in the trust deed. — Guthrie v. Moore', 182 N. C. 24, 108 
B. E. 834. 

374 Bights of holder in doe course. A holder in due course 
holds the iuatrument free from any defect of title of prior parties, 
and free from defenses available to prior parties among them- 
selves, and may enforce the payment of the instrument for the 
full amount thereof against all parties liable thereon. 

C. S., B. 3038; Rev., s. 2206; 189?, c. 73S, s. 57. 

Standing Stone Nat. Banii v. Walser, 162 N. C. 53, 77 S. E. 1006. 

BIUb and Notes gUS. The holder in due course of a note indorsed to it 
ft$ collateral security has the legal right to collect it, and may maintain 
an action thereon against the maker; it not appearing the indorser'a debt 
has been paid.— American Nat. Bank of Richmond v. Hill, 160 N. C. 235, 8S 
S. E. 209. 

376. When anhject to original defenses. In the hands of any 
bolder other than a holder in due course a negotiable instru- 
ment ie subject to the same defenses as if it were nonnegotiable. 
But a holder who derives his title through a holder in due course 
and who is not himself a party to any fraud or illegality a£fecting 
the instrument has all the rights of such former holder in respect 
of all parties prior to the latter. 

C. S., «. 3039; Rev., s. 2207; 1899, c. 733, s. 58. 

BlUa and Notaa g351. The purchaser of a note after its maturity takes 
it subject to all defenses available against it in the hands of the payee. — 
Caoaey v. Snow, 122 N. C. 326, 29 S. E. 359. 

Bills and Notes g 361. One taking a note by assignment after maturity 
takes it with notice of all equities, and other rights of the indorser, and 
subject to them. — Sykes v. Everett, 167 N. C. 600, 83 S. E. 585. 

376. Who deemed holder in due course. Every holder is 
deemed prima facie to be a holder in due course ; hut when it is 
shown that the title of any person who has negotiated the instru- 
ment was defective, the burden is on the holder to prove that he 
or some person under whom he claims acquired the title as a holder 
in due course. But the last mentioned rule does not apply in 

Denized bvCjOO^Ic 



210 North Cabolina Corporation Code 

favor of a party who became bound on the inBtrument prior to 
the acquisition of such defective title. 

C. S., H. 3040; Bev., b. 2208; 1899, c. 73!, a. 59. 

Bills and Notes §497. When there is evidence teadiDg to show fraud 
in the eKeciition of a note, the burden is on plaintiff to show that be was 
a bona fide purchaser of the note, and not ou the defendants to establish 
the negative of that proposition. — Dennison v. Spivey, 180 N. 0. 220, 104 
8. B. 370. 

Bills and Notes §497. In an assignee 'b ui'tiou on urt-ejitaLiui-a, defeudaut 
having pleaded frnnd in ezerntton and introdnced evidence, burden was 
on plaintiff to prove by greater weight of evidence that it was holder in 
dui? course for value and without notice. — Metropolitan Discount Co. v. 
Baker, 176 N. C. 546, 97 S. E. 495. 

Bills and Notes § 497. In an action by indorsees on notes, establishment 
of fraud held to cast burden on pKiintiffs to show acquisition of notes fie- 
fore maturity in good faith for value, without notice of defect in title of 
indorser.— Wilson v. Lewis, 170 N. C. 47, 86 S. E. 804. 

BUlS and Notas §497. Everv holder of a note dulv executed is prima 
facie a holder in due course. Gulf States Stool Co. v. Ford, 173 N. C. 195, 
91 S. E. 844. 

Bills and Notes % 497. It is error to place on an indorsee, who has proved 
the indorsement, the burden of proving that he is a bona fide purchaser; 
there being no evidence that his title is defective. — Moon v. Simpson, 170 
N. C. 335, 67 S. E. 118. 

Bills and Notes g 407. Where fraud in the procurement of note is plead- 
ed as a defense to the payment of a note, with evidence tending to estab- 
lish it, the burden of proof is on the plaintiff claiming to be a holder in due 
course, to show that he purchased in good faith and without notice of any 
iofirmitv or defect, for value and before maturity. — Fidelity Trust Co. v. 
Whitehead, 165 N. C. 74, 80 8. E. 1065. 

ART. 6, LIABILITIES OP PARTIES. 

377. IJabilit; of maker. The maker of a negotiable instru- 
ment by making it engages that be will pay it according to its 
tenor, and admits the existence of the payee and his then capacity 
to indorse. 

C. S., B. 3041; Eev., b. 2209; 1899, c.' 733, s. 60. 

378. Liability of drawer. The drawer by drawing the instru- 
ment admits the existence of the payee and his then capacity to 
indorse, and engages that on due presentment the instrument 
will be accepted or paid, or both, according to its tenor, and that 
if it be dishonored and the necessary proceedings ou dishonor be 
duly taken, he will pay the amount thereof to the holder or to 
any subsequent iudorscr who may be compelled to pay it. But 
the drawer may insert in the instrument an express stipulation 
negativing or limiting his own liability to the holder. 

C. 8., s. 3042; Rev. a. 2E10; 18fl9, c. 733, b. 01. 

r,Kmz.dbX.003lC 



North Cabolina Cobpokation Code 211 

BlllB and Not«s g 363. A drawer of & draft, oTdinarily Btiiiidiug towards 
subsequent purties as a general iudoraer, may, by appropriate words appeur- 
iiig on the paper or by agreement detiorg the inBtrument as to peraou af- 
fected with notice, retain the right to arrest payment aud likewise restrict 
his obligation.— Murehison National Bank v. Dunn Oil Mills Co., l.'iO N.,C. 
718. 64 8, E. 885. 

379. Liability of acceptor. The acceptor by accepting the in- 
strument engages that he will pay it according to the tenor of 
his acceptance; and admits (1) existence of the drawer, the 
genuineness of his signature, and his capacity and authority to 
draw the instrument; and (2) the existence of the payee and his 
then capacity to indorse. 

C. 8., s. 3043; Rev., 8. 2211; 1899, c. 733, s. 62. 



S26, 23 S. E. 455. 

Banks % 12&. A drawee bauk is presumed to know the genuineness of the 
signatnrcs of its depositors, and when it aeeepts a forged cheek from an- 
other of its depositors and plaees it to his credit, It is caosidercd as a 
payment of the check which without anything further appearing, cannot 
be withdrawn; but where such other depositor is aware of the fnet of 
forgery, indorses the check, and it is aceordinglj' credited to Itim without 
knowledge of such facts on the part of the bank, the bank may rL'turn the 
cheek to such depositor and rightfully charge his account therewith, with- 
out reference to anv fraudulent intent on his part. — Woodward v. The Sav- 
ings & Trust Co., 178 N. C. 184, 100 S. E. 304. 

380. When person deemed indorser. A person placing his sig- 
nature upon an instrument otherwise than as maker, drawer, or 
acceptor is deemed to be an indorser, unless he clearly indicates 
by appropriate words his intention to be bound in. «ome other 
capacity. 

C. 8., e. 3044; Kev., s. 2212; 18B9, c. 733, a. 63. 

Bills and Notes- gSS7. lii order to show a proper negotiation of a com- 
mercial instrument payable to order, so iis to shut o& oijuitiea and defenses 
existing between the original parties, it must be endorsed by the holder or 
by some one for him duty anthori7:ed, by writing the name of the holder 
OH the instrument Itself, usually on the back thereof, or on some paper 
phrsically attached thereto at the time of the indorsement was made. — 
Critcher v. Ballard, ISO N. C. Ill, 104 S. E. 134. 

Bills aud Notes §271. One placing his signature on the back of a nego- 
tiable paper is deemed an indorser thereof, and under the expresH ti'rms of 
the statute should "clearly indicate by appropriate words his intention _to 
he bound in some other capacity," when such exists, in order for him to 
avail himself thereof as a defense in an action brought by a holder in 
due course.— The Meyers Co. v. Battle. 170 N. C. 168, 86 S. E. 1034. 

Evidence §423. — Parol evidence is inadmissible to show that defendant, 
who had indorsed a note by writing his name across the back, signed as an 
original promisor. — Ibid. 

Bills and Notes §396. One indorsing a note in blank before dfliverv 

r„.„z.dbX.003le 



212 North Cabouma Corporation Code 

without indicating his intention to be bonnd otherwise, is an "indoreer," 

who, not being given notice of nonparnient and diahouor is discharged. — 
J. W. Perry Co. v. Taylor Bros., 148 N. C. 363, 62 S. E. 423! 

Bills Uld Notes § 281. Where a payee or regular indorsee of a note writes 
bis name on the back, the law, as between him and a bona fide holder for 
value and without notice, implies that he intended to assume the liability 
of an iudorser.— Sykes v. Everett, 167 N. C. 600, 83 8. E. 585. 

Blllfl and Notas ^281. An indorser undertakes to pay if the debtor does 
not, after due notice of dishonor, — Ibid, 

381. XJabilitT' of irregular indorsw. Where a person not other- 
wise a party to an instrument places thereon bis signature in 
blank before delivery he is liable as indorser in accordance with 
the following rules : (1) If the instrument is payable to the order 
of a third person he is liable to the payee and to all subsequent 
parties ; (2) if the instrument is payable to the order of the maker 
or drawer, or is payable to bearer, he is liable to all parties sub- 
sequent to the maker or drawer; (3) if he signs for the accom- 
modation of the payee he is liable to all parties subsequent to the 
payee. 

C. 8., s. 3043; Rev., s. 2213; 1899, c. 733, s. 64. 

Bllla and Hotea 8 396. One indorsing a note in blank before delivery 
without indicating his intention to be bound otherwise, is an "indorser," 
who, not being given notice of nonpayment and dishonor', is discharged. — 
J. W, Perry Co. v. Taylor Bros., 148 N. C. 382, 62 8. E. 423. 

382. WaiTSJity, where negotiation by deliveiy. Every person 
negotiating an instriunent by delivery or by a qualified indorse- 
ment warrants (1) that the instrument is genuine and in all 
respects what it purports to be; (2) that he has a good title to 
it; (3) that all prior parties had capacity to contract; (4) that 
he has no knowledge of any fact which would impair the validity 
of the instrument or render it valueless. But when the negotia- 
tion ia by delivery only the warranty extends in favor of no holder 
other than the immediate transferee. The provisions of subdivi- 
sion three of this section do not apply to persons negotiating pub- 
lie or corporate securities other than bills and notes. 

C. a, 8. 3046; Bev., s. 2214; 1899, c. 733, s. 65. 

383. Liability of general indorser. Every indorser who en- 
dorsed without qualification warrants to all subsequent holders 
in due course (1) the matters and things mentioned in subdivi- 
sions one, two and three of the next preceding section ; and (2) that 
the instrument is at the time of this indorsement valid and sub- 
sisting. And in addition he engages that on due presentment 
it shall be accepted or paid, or both, as the case may be, according 

DiyilzcdbvCoO^IC 



NOBTH Carolina Corporation Code 21S 

to its tenor, and that if it be dishonored and the necessary 
proceedings on dishonor be duly taken he will pay the amount 
thereof to the holder or to any subsequent indorser who may be 
compelled to pay it. 

C. 8., e. 3047; Bev., a. 2215; 1866, c. 733, a. 66. 

B1U« and Kotw g376. — The priueipte that a note for a gambling debt 
caDnot be collected does not extend to suits by an innocent indorsee for 
value and holder In dne conrse, atcaintt tbe Indonei on his eontraet of In- 
dorsement, which is by virtne of above section, a contract independent of the 
instrument on which it appears, and guarantees that the note is a valid and 
subsisting obligation,— Wachovia Bank, & Trnst Co. v. Grafton, 181 N. C. 
40^^ 107 B. B. S16. 

Bills and NotM g280. When Young endorsed the noto, although past 
due, to plaintiff, he warranted that It was genuine — that he had a good title 
to it; that he had no knowledge of any fact which would impair its valid- 
ity or reader it valueless, and that on presentment it would be paid. Hence, 
his title to the note and his right to demand all securities which Yonng 
beld are clear.— Smith v. Godwin, 145 N. C. 242, 5S S. E. 1089. 

Bills and NotM g2M. The provisions made as to warranties which pre- 
vail in case of unqualified indorsements refer to lawful transactioDS, and 
do not relate to transactions coming within the meaning of our usury laws. 
— Sedbury t. Duffy, 158 N. C. 433, 74 8. E. 355. 

Bills and Notes g 280. A parol agreement made between an indorser 
of a negotiable instrument in blank and his transferee may be shown be- 
tween the immediate parties to the transaction by parol evidence, and is 
not objectionable as a contradiction of the liability of an indorser implied 
by law, except as to subsequent holders in due course without notice.— 
Sykea v. Everett, 167 N. C. 600, 83 8. E. 585. 

Bills and NotSB g 281. Where the payee (whether original or by a pre 
vions indorsement] of a note assigns or transfers it by indorsement, he be 
comes simply an indorser and liable as a surety, unless by the terms of the 
nssignment he limits his liability. — Davidson v. PowoU, 114 N. C. 575, IB 
S. E. 601. 

Bills and Notes g 306. In an action upon an indorsement of a note with 
the agreement that the indorsee should exhaust the collateral befote re- 
coarse to the indorser, where there was no allegation or proof that the in- 
dorser made any false representation as to the time within which the col- 
lateral might be realized, his remark as to the time held immaterial. — Sykes 
V. Everett, 167 N. C. 600, 83 8. E. 585. 

NOTE: Sometimes a person or corporation may boeome liable because of 
representations made and not by indorsement. 

An officer of defendant railroad company was authorized by its direc- 
tors to Bell certain bonds which had been issued to it by a town to aid in 
the construction of its road, and pursuant to such authority sold them to 
the president of plaintiff bank acting on its behalf. . Prior to and during 
the negotiations, such officer expressly stated in writing to the purchaser 
that the bonds were valid and had been so adjudged by a court of the state, 
and the purchase was made in reliance on such representation. The bonds 
were in fact void for want of power in the town to issue them, and were 
subsequently so adjudged. Held, that the statement of their validity made 
as an inducement to the sale was an express warranty that they had a valiil 
legal existence as gecorities which was binding on defendant, and that plain- 
tiff was entitled to recover from defendant thereon the consideration paid 



214 North Gabolina Cobpobation Code 

therefor.— Union Bank of Eichmond v. Oiford 4 C. L. E. Co., 74 C. C. A. 
32S, 143 Fed. 193. In this case, the Supreme Court of tho United States 
denied a petition for writ of certiorari, 206 U. S. 565, 51 L. Ed. 1191. 

384. Liability of indorser, where paper negotiable hj delivery. 
Where a person places his indoraeinent on an instrument negotia- 
ble by delivery he incurs all the liabilities of an indorser. 

C. 8. 8. 3048; Bev. a. 2216; 1889, c. 733, s. 67. 

'386. Order in wbich indorsers are liable. As respects one 
another, indorsers are liable prima facie in the order in which 
they indorse; but evidence is admissible to show that as between 
or among themselves they have agreed otherwise. . Joint payees 
or joint indorsers who indorse are deemed to indorse jointly and 
severally. 

C. 8., B. 3049; Bev., 8. 2217; 1809, e. 733, a. 68, 

BllIJ and Notes g306. A payee wIlo )iaa been compelled to pay a note 
on his indorsement cannot enforce reimbursement from a aubaequetit in- 
doraer. — Lynch v. Loftin, 153 N. C. 270, 69 S. E. 143. 
-Bills and Notes g SOS. In a suit by the payee of a note to recover from 
a subsequent indorser the amount of a judgment obtained against the payee 
OS an indorser, a change in the prima facie order of liability of indoraers is 
not shown by allegation of a contract between the maker and such subne- 
quent indorser whereby the note was to be discharged, in the absence of a 
showing that the maker executed the contract on bis part. — Ibid. 

Bills and Notes §306. If the maker of a note by. performing an iigree- 
ment with a subsequent indorser discharged and paid the note, tho pay- 
ment inured to the benefit of the payee, as alTecting his liability as indorser, 
and such indorser would bo required to account lo tho payee for the con- 
sideration received. — Ibid. 

Bills and Notes § 308. One who obtains possession of negotiable paper, 
after indorsing it, ia restored to his original poaitioii, and cannot liolii 
intermediate parties who could look to him. It is equally true that one 
who derives possession of the paper from him, with notice of this fad, 
cannot hold such intermediate indorsers liable; and when such indorscmeutx 
arc in blank, oral testimony ia admissible to show the relation in which 
they stand.— Adrian v. McCnskill, I0:i N. C. 182, 9 S. E. 284. 

386. Liability of agent or broker. Where a broker or other 
agent negotiate-s an instrument without indorsement he incurs all 
the liabilities prescribed by section three thousand and forty-six 
(herein 383), unless he discloses the name of his principal and the 
f^ct that he is acting only as agent. 

C. S., s. 3050; Hcv.-, a. 2218; 1899, c. 733, s. 69. 

ART. 7. PRESENTMENT FOR PAYMENT. 

387. Effect of want of demand on principal debtor. Present- 
ment for pajTiient is not necessary in order to charge the person 
primarily liable on the instrument; but if the instrument is by 



sdbyCoOgIC 



NOBTH CABOLINA CORPORATION CODB 215 

ita temifl payable at a special place, and he is able and willing to 
pay it there at maturity, such ability and willingness are equiva- 
lent to a tender of payment upon his part. But, except as herein 
otherwiae provided, presentment for payment ia neeessary in 
order to charge the drawer and indoraers. 
C. 3., 8. 30S1; Rev., g. 221&; 1S99, c. 733, b. TO. - 

Bills and Nat«a gMS. PreHentmcut and demand at the bunk at wliicli u 
note is payable ib neceBsaiy to charge an indorBer, except where the maker 
hu no fiuds ftt the bank to meet it.— Ueyera Co. v. Battle, 170 N. 0. 108, 
« B. E. 1031. 

Bills and Notes §403. The holder of a check cannot sue the drawer 

tbereon till it has been proaented to the drawer, and payment refused. — 
Commercial Nat. Bank v. First Nat. Bank, 118 N. C. 783, 24 S. E. 524. 

BiUs and Notes § 403. An iudorsemeat on a note renders the indorsci 
liable as a surety; and no demand on the maker, or notice to the indorser 
«f such demand, is nceessarv to bind him. — First Nat. Bank v. Eoreka 
Lumber Co., 123 N. C. 24, 31 S. E. 348. 

Bills and Hotae §403. Where, on trial of an action, a material fact wus 
whether a draft had been preaeutpd to plaintiff for acceptance and pay- 
ment and it appeared that plaintiff, having received notice Hint a draft 
had been, drawn on him by defendant, applied at the bank where Ue usually 
received drafts but the defendant's draft had not been received and plain- 
tiff testified that he waa employed at a cotton gin; that his duties were 
outside the office and that he had no desk there but that his place of buai- 
nesB was at his residence and that the draft had never been presented to 
him; while the bank collector testified that ho took the draft to the giu 
for acceptance three times, left a printed notice and notified plaintiff's son. 
Held, that whether the draft had been duly presented was a question for the 
jury. — Burruss v. Life Ins. Co. of Va., 121 N. C, 62, 28 8. E. 62; J. W. Perry 
Co. V. Taylor Bros,, 148 N. C. 362, 62 S. E. 423. 

388. Presentment, where the instrument ia not payable on de- 
mand. Where the instrument is not payable on demand., present- 
ment must be made on the day it falls due. Where it is payable 
on demand, presentment must be made within a reasonable time 
after its issue, except that in the case of a bill of exchange pre- 
sentment for payment will be sufficient if made within a reason- 
able time after the last negotiation thereof. 

C. a, B. 3052; Rev., s. 2220; 1899, c. 733, s. 71. 

389. What constitutes a sufflcient presentment. Presentment 
for payment to be sufficient must be made (1) by the holder or 
hy some person authorized to receive payment on his behalf; (2) 
at a reasonable hour on a business day; (3) at a proper place as 
herein defined; (4) to the person primarily liable on the instru- 
ment, or, if he is absent or inaccessible, to any person found at 
the place where the presentment is made. 

C. S., s. 3053; Bev., b. 2221; 1869, c. 733, s. 72. 

DiyilzcdbvCjOOglC 



216 North Carm-ina Corporation Code 

BUla uid Notw % 399. The preeentment of a bill of exohange oi draft 
must be made to the drawee or acceptor, or to an authorized agent. — Bur- 
TUHs T. Life Ins. Co. ot Ya., 124 N. C. S, 32 S. E. 323. 

390. Place of presentment. Presentmeat for papnent is made 
at the proper place (1) where a place of payment is specified in 
the instrument and it is there presented; (2) where no place of 
payment is specified, but the address of the person to make the 
payment is given in the instrument, and it is there presented; 
(3) where no place of payment is specified and no address is 
given and the instrument is presented at the usual place of busi- 
ness or residence of the person to make payment; (4) in any other 
case if presented to the person to make payment wherever he can 
be found, or if presented at his last known place of business or 
residence. 

C. S., B. 3054; Bev., b. 2222; 1899, c. 733, a. 73. 

Burrusa v. Life Ins. Co. of Va., 124 N. C. », 82 8. E. 323; Sullivan v. 
Mitchell, 4 N. C. 93. 

391. Instroment must be exhibited. The instrument must be 
exhibited to the person from whom payment is demanded, and, 
when it is paid, must be delivered up to the party paying it. 

C. S., s. 3055; Bev., s. 2233; 1899, c. 733, b. 74. 

392,. Presentment where Instnunent payable at bank. Where 
the instrument is payable at a bank presentment for payment 
must be made during banking hours, unless the person to make 
payment has no funds there to meet it at any time during the 
day, in which case presentment at any hour before the bank is 
closed on that day is sufficient. 

C. S., 9. 3056; Rev., a. 2224; 1899, c. 733, b. 75. 

Bills and Notes g 403. Presentment and demand at the bank at which 
a note is payable is necessary to charge an indorser, except where the raaker 
has no funds at the bank to meet it.— Meyers Co. v. Battle, 170 N. C. 16S, 
86 S. E. 1034. 

BUla and Notes §403. Where an instrument is pB7ablo at a particular 
bank, presentment must be made at that bank. — Sullivan v. Mitchell, 4 
N. C. 93. 

393. Presentment where principal debtor ia dead. Where the 
person primarily liable on the instrument is dead, and no place 
of payment is specified, presentment for payment must be made 
to his personal representative, if such there be, and if with the 
exercise of reasonable diligence he can be found. 

C. S., B. 3057; Rev., a. 2225; 1899, c. 733, a. 76. 

394. Presentment to persons liable as partners. Where the 
persons primarily liable on the instnunent are liable as partners 

DidilzedbyCoOglC 



North Cabolina Corporation Code 217 

and no place of payment is specified, presentment for payment 
may be made to any one of them, even though there has been a 
dissolution of the firm. 

C. 8., B. 3058; Bev., b. 22S6; 18M, C. 73Z, a. TT. 



306. Presentment to joint debtors. Where there are several 
persons not parties primarily liable on the instrument and no 
place of payment is specified, presentment must be made to them 
all. 

0. a, s. 3059; Bev., b. 2227; 1899, c. 733, a. 78. 

396. When presentment not required to charge the drawer. 
Presentment for payment is not required in order to charge the 
drawer where he has no right to expect or require that the drawee 
or acceptor will pay the instrument. 

C. B., ». 3060; Bev., s. 2228; 1899, c. 733, b. 79. 

Bllla and Kot«B % 394. Oenerally, if the drawer of a. bill has no rensoa- 
afcle ground to expect it to be honored, the holder is not bound to strict 
presentment and notice; but if the drawer has funds in the hands of the 
drawee, he has a right to expect his bill to be honored hy applying thereto 
the funda belonging to the drawer or otherwise; and the drawer is entitled 
to presentment of hia bill in reaaonable timo and strict notice if diahonored, 
although the drawer knew or had reason to believe when he drew the bill 
that the drawee waa insolvent.— Cedar Falls Co. v. Wallace Bros., 83 N. C. 
225. 

397. When presentment not required to charge the indorser. 
Presentment for payment is not required in order to charge an 
indorser where the instnuneat was made or accepted for his ac- 
commodation, and he has no reason to expect that the instrument 
will be paid if presented. 

C. S., B. 3061; Bev., s. 3339; 189B, c. 73S, s. 80. 

BUlB and Notw g 897. Preaeotmont and demand at the bank at wUek 
a note ia payable ia necessary to charge an indorser, except where the 
maker biu no funds at the bank to meet it. — Heyera Co. v. Battle, 170 N. 0. 
16S, 86 S. E. 1034; Cedar Palls Co. v. Wallace Bros., 83 N. C. 225. 

398. When AtAaj in presentment is excused. Delay in making 
presentment for payment is excused when the delay is caused by 
circumstances beyond the control of the holder and not imputable 
to his default, misconduct, or negligence. When the cause of 
delay ceases to operate presentment must be made with reasona- 
ble diligence. 

C. a, a. 3062; Bev., b. 2230; 1S99, e. 733, s. SI. 

S9B. When presentment maj he dispensed with. Presentment 
for payment is dispensed with (1) where after the exercise of 



218 NoETH Carolina Coeporation Code 

reasonable diligence presentment as reqnired by this chapter 
cannot be made; (2) where the drawee is a fictitious person; (3) 
by waiver of presentment, express or implied. 

C. S., a. 3063; Bev., 8. 2231; 1899, c. 733, 8. 83. 

Onanuity §72. Where county which accepted bid for bonds, agent of 
bidder indorsing checka and malting hia check to eounty as security, in- 
tending thereby to guaranty bid, delayed presentation of inatrumentB for 
payment at agent's epecial request, he cannot complain when sued, tbat 
demand was not made earlier. — Caldwell County v. George, 176 N. C. 602, 
97 8. E. 507. 

400. When instrumeot dishonored by nonpayment. The instru- 
ment is dishonored by nonpayment when (1) it la dnly presented 
for payment and payment is refused or cannot be obtained; or (2) 
presentment is excused and the instrument is overdue and unpaid. 

C. 8., 8. 3064; Rev., a. 2232; 1899, c, 733, a. 83. 

401. Liability of persons secondarily liable when instrument dis- 
honored. Subject to the provisions of this chapter, when the in- 
strument is dishonored by nonpayment, an immediate right of re- 
course to all parties secondarily liable thereon accrues to the 
holder. 

C. 8., B. 3065; Kev.. s. 2233; 1899, c. 733, a. 84. 

402. Time of maturity. Every negotiable instrument is paya- 
ble at the time fixed therein witho\it grace, except as allowed by 
the succeeding section. When the day of maturity falls upon 
Sunday or a holiday the instrument is payable on the next suc- 
ceeding business day, 

C. 8., s. 3066; Rev., s. 2234; 1899. e. 733, 8. 85; 1907, c. 897; 1909, c. 
800, a. 1. . 

403. When d&ys of grace allowed. All bills of exchange paya- 
ble within the state, at sight, in which there is an express stipu- 
lation to that effect and not otherwise, shall be entitled to days 
of grace as the same are allowed by the custom of merchants od 
foreign bills of exchange payable at the expiration of a certain 
period after date or sight, but no days of grace shall be allowed 
on any bill of exchange, promissory note, or draft payable on de- 
mand. 

C. S., 8. 3067; Bev., 8. 2235; Code, a. 43; 1905, c. 327; lfl07, c. 861. 

404. How time is computed. Where the instrument is payable 
at a fixed period after date, after sight, or after the happening of 
a specified event, the time of payment is determined by exclud- 
ing the day from which the time is to begin to run and by includ- 
ing the date of payment. 

C. 8., s. 3068; Bev., s. 2236; 1899, c. 7S3, s. 86. , , , 

r„.„z.dbA.003lC 



NOBTH CAEOLINA COBPORATION CODE 219 

405. Rule where ioBtrumeiit is payable at banb. Wliere the iu- 
slniueDt IB made payable at a bank it is equivalent to au order 
lo the bank to pay the same for the account of the prjacipal debtor 

thereon. 

C, S., s. 3069; fiev., 8. 2237; 1899, c. 733, s. 87. 

Banks &nd Banking g 165. Where bank at ^rliicb note niks pnyable ru- 
leived it for collcetton, obtainod maker's order to rhatge it to his account, 
ind kapt it until it went iato receivership, held, that there was payment. — 
PMslBB-Gaulbert Co. v. Dixon, 172 N. C. 411, 90 8. E. 431. And sui^h bank 
iaa no right, irithout epecial authority, to accept a part payment. — Ibid. 

Bills and Notes § 15. A check is a bill of exchange, and may more par- 
ticularly be defined as a written order on a bank or banker, purportiuR to 
be drawn against a deposit of funds, for the payment, at all events, of a 
■nm of money to a certain person therein named, or to blm or his order, 
or lo bearer, and pavable on demand. — Standard Trust Co. v. Commercial 
Xat. Bank, 166 N. C. 112, 81 B. E. 1074. 

406. Wh&t constituteB payment in due course. Payment is 
made in due course' when it is made at or after the maturity of 
the instrument to the holder thereof in good faith and without 
notice that his title is defective. 

C. S., s. 3070; Bcv., s. 2238; 1899, c. 733, s. 88. 

AET. 8. NOTICE OF DISHONOR. 

407. To whom noticei of dishonor must be given. Except as 
herein otherwise provided, when a negotiable instrument has 
becD dishonored by nouacceptance or nonpayment, notice of dis- 
bonor must be given tothe drawer and to each indorser, and any 
drawer or indorser to whom such notice is not given is discharged. 

C. S., 8. 3071; Bev., s, 2239; 1899, c. 733, b. 89. 

Bills and Notes §396. An indoTser of a negotiable inatrument is entitled 
lo notice of dishonor under our statute, and upon failure of notice his lia- 
bilitv thereon is discharged.— Barber v. W. M. Absher Co., 175 N. C. 602, 
96 Sl E. 43. 

BUU and Note* g 396. An indorser is entitled to notice of dishonor, and 
Lb not liable unless such notice is given. — Horton v. Wilson, 175 N. C. 533, 
95 S. E. 904. 

Bllla sind NotM 8 395. The indorser of a nonnegotiable note was not 
entitled to notice of dishonor.— Newland v. Moore, 173 N. C. 728, 92 S. E. 
M7. 

Bills and Notes §397. That a maker of a promiHSory note executed a 
mortgage sccoring the indorsers thereon does not remove the nefessity of 
notice of dishonor as to the in .—Barber v. W. M. Abslier Co,, 175 N. C. 
«02, 96 S. E. 43. 

Bills and Notos §414. Indorser is liable conditionally, und does not un- 
dertake to pay absolutely, but only after notice of dishonor; and is entitled 
to notice of dishonor. — Edwards v. Jefferson Standard Life Ins. Co., 173 
N. C. 614, 92'S. E. 895. ^-- i 

DiclzedbyCjOOglC 



220 North Cabouna Corpobation Code 

BUls »nd Notea §116. Telling indorser's bod, the day before a note fell 
due, that it would not be paid, and that indorser woald be held liable, is 
not notice of dishonor.— Horton v. WHbod, 175 N. C. 533, 95 S. E. 904. 

Bills Uid Notes 8 3B5. An indorser of a past-due nonnegotiable inatni- 
ment held not entitled to notice of dishonor.— Johnson v. Lasaiter, 155 N. C. 
47, 71 8. E. 23. 

BUls aoA Notes §114. Accommodation indorsers of a note are entitled to 
notice of dishonor.— Ho user v. Fayesoui, 168 N. C. 1, 83 8. E. 692. 

Bills and Notes % 414. That accommodation indorsera of a note are di- 
rectors of the corporation, which is the maker, and constitnte a majority 
of its board of directors, does not deprive them of the right to notice of 
dishono r.— -Ibid. 

BUla and Notes g 396.' One indorsing a note in blank before delivery, 
without indicating his intention to be bound otherwise, is an indorser, who, 
not being given notice of disbonor and nonpayment, is discharged. — -J. W. 
Perry Co. v. Taylor Bros., 148 N. C. 362, 62 B. E.. 433. 

Bills and Notea §610. In an action by a bank against the indorser of 
a note, the custom of the bank as to the character and time of sending 
their notices of nonpayment is admissible. — Fourth Nat. Bank of Fayette- 
villo T. Wilson, 168 N. C. SS7, 84 S. E. 866. 

Banks and Banking g 171. If plaintilF bank, after receiving a check for 
collection and after giving defendnnt trust compaay, sender, credit there- 
for, delayed for 40 days to inform defendant that check had been lost or 
not paid, and the drawer in the meantime became insolvent, plaintiff can- 
not recover from defendant the sum lost by such negligent delay irrespect- 
ive of whether drawee bank would have paid the cbeck if promptly pre- 
sented. — American I4at. Bank v. Savannah Trust Co., 177 N. C. 254, 98 8. 
E. 59S. 

i of 

408. By whom notice given. The notice may be given by or on 
behalf of the holder or by or on behalf of any party to the instru- 
ment who might be compelled to pay to the holder, and who upon 
taking it up, would have a right to reimbursement from the party 
to whom notice is given. 

C. S., 8. 3072; Bev., s. 2240; 1S99, c. 733, s. BO. 

409. Notice given 1^ agent. Notice of dishonor may be given 
by an agent either in his own name or in the name of any party 
entitled to give notice, whether that party be his principal or not. 

C. S., s. 3073; Bev., s. 2241; 1899, c. 733, s. 91. 

410. Effect of notice given on behalf of holder. Where not^e 
is given by or on behalf of the holder, it inures to the benefit of 
all subsequent holders and all prior parties who have a right of 
recourse against the party to whom it is given. 

C. 8., s. 3074; Rev., s. 2242; 1899, c. 733 ,s. 92. 

411. Effect, where notice is given hj partj entitled thereto. 
Where notice is given by or on behalf of a party entitled to give 

DidilzedbyCoO^^IC 



NoETH Carolina Corpobahon Code 221 

notice it innres to the benefit of the holder and all parties subse- 
quent to the party by whom notice is given. 

C. 8., 8. 307S; Bev., a. Z243; 18B9, e. 733, b. 93. 

412. When aguit may give notice. Where the instrument has 
been dishonored in the hands of an agent, he may either himself 
give notice to the parties liable thereon or he may give notice to 
his principal. If he give notice to his principal he must do so 
within the same time aa if he were the holder, and the principal 
upon the receipt of such notice has himself the same time for giv- 
ing notice a^ if the agent had been an independent holder. 

C. 8., 8. 3076; Bei^, s. 2244; 1899, c. 733, a. 94. 

413. When notice snfScient. A written notice need not be 
signed and an insufficient written notice may be supplemented 
and validated by verbal eommnnieation. A misdescription of the 
instrument does not vitiate it unless the party to whom the notice 
is given is in fact misled thereby. 

C. H., B. 3077; Bev., b. 224S; 1899, c. 733, s. 95. 

414. Form of notice. The notice may be in writing or merely 
oral, and may be given in any terms which sufficiently identify 
the instrument and indicate that it has been dishonored by non- 
aeeeptance or nonpayment. It may in all cases be given by deliv- 
ering it personally or through the mails. 

C. 8., B. 307S; Bev., 8. 2246; 1899, c. 733, a. 96. 

416. To whom notice may be given. Notice of dishonor may 
be given either to the party himself or to his agent in that behalf. 
C. C, 8. 3079; Bev., a. 2247; I8OT, c. 733, a. 97. 

416. Notice when party is dead. When any party is dead and 
his death is known to the party giving notice, the notice must be 
given to a personal representative if there be one, and if with 
reasonable diligence he can be found. If there is no personal rep- 
resentative, notice may be sent to the last residence or last place 
of business of the deceased. 

G. S., a. 3080; Bev., a. 2248; 1899, c. 733, b. 98. 

417. Notice to partners. When the parties to be notified are 
partners, notice to any one partner is notice to the firm, even 
though there has been a dissolution. 

C. 8., 8. 3081; Bev., b. 224S; 1899, e. 733, b. 99. 

418. Notice to persons jointly liable. Notice to joint parties 
who are not partners must be given to each of them unless one of 
them has authority to receive such notice for the others. 

C. 8., 8. 30S2; Bev., b. 2250; 1899, e. 733, a. 100. /^-~ i 

DiyilzcdbvCjOO^^IC 



222 North Carolina Corporation Code 

419. Notice to bankrupt. Where a party has beeo adjudged a 
bankrupt or an insolvent or has made an assignment for the bene- 
fit of his creditors, notice may be given either to the party himself 
or to his trustee or assignee. 

C. S., B, S083; Rev., a. 2251; 189B, c. 733, s. 101. 

420. Time within which notice must be given. Notice may be 
given as soon as the instrument is dishonored, and unless delay is 
excused as hereinafter provided, must be given within the times 
fixed by this chapter. 

C. S., B. 3084; Bev., .s 2252; 1899, e. 733, s. 102. 

421. Notice where parties reside in the same place. When the 
person giving and the person to receive notice reside in same 
place, notice must be given within the following times: (1) If 
given at the place of busiaess of the person to receive notice it 
must be given before the close of business hours on the day fol- 
lowing; (2) if given at his residence it must be given before the 
usual hours of rest on the day following; (3) if sent by mail it 
must be deposited in the postoffice in time to reach him in the 
usual course on the day following. 

C. 8., 8. 3085; Rev., s. 2253; 1899, e. 733, a. 103. 

422. Notice where parties reside in different places. Where 
the person giving and the person to receive notice reside in differ- 
ent places the notice must be given within the following times : 
(1) If sent by mail it must be deposited in the postoiSce in time 
to go by mail the day following the day of dishonor, or it there be 
no mail at a convenient hour on that day, by the next mail there- 
after; (2) if given otherwise than through the postolfiee, then 
within the time that notice would have been received in due 
course of mail if it had been deposited in the postoffice within the 
time specified in the last subdivision. 

C. S., B. 3086; Hev., b. 2254; 1899, c. 733, s. 104. 

Bills and Notes §416. Where an accepted draft is uot paid at maturity 

notice must, at the latest, be mailed to thoBe secondarily liable on the day 
after the diahonor, if there is a daily mail which does not leave before 
business hours. — Nat. Bank, of Asheville v. Bradley, 117 N. C. 526, 23 
8. E. 455. 

Bills ftUd Notes g 116. The peraonal guaranty of a school committeeman is 
discharged by unreasonable delay of more than sisty days in preaentiui; 
a Bight draft for payment. — Pirat Nat. Banlc of Gaatonia v. Warlick, 125 
N. C. 593, 34 S. E. 687. 

42B. When sender deemed to have given due notice. Where 
notice of dishonor is duly addressed and deposited in the post- 

DidilizedbyCoO^^fc 



North C^souna Cobforation Code 223 

office the sender is deemed to have given due notice, notwith- 
standing any miscarriage in the mails. 

C. 8., s. 3087; Bev., 8. 2255; 1899, c. 733, a. 105. 

£24 What constitutes deposit in postoffice. Notice is deemed 
to have been deposited in the postoffice when deposited in any 
branch postoffice or in any letter-box under the control of the 
postoffice department. 

C. 8., a. 3088; Bev., a. 22S6; 18S9, c. 733, b. 106. 

426. Time of notice to antecedent parties. Where a party re- 
ceives notice of dishonor he has, after the receipt of such notice, 
the same time for giving notice to antecedent parties that the 
holder has after the dishonor. 

C. 8., B. 3089; Rev., a. 2257; 1899, c. 733, a. 107. 

426. Where notice must be sent. Where a party has added an 
address to his signature, notice of dishonor must be sent to that 
address; but if he has not given such address, then the notice 
must be sent as follows: (J) Either to the postoffice nearest to 
hia place of residence or to the postoffice where he is accustomed 
to receive his letters; or (2) if he lives in one place and has his 
place of business in another, notice may be sent to either place; 
or (3) if he be sojourning in another place notice may be sent 
to the place where he is sojourning. But where the notice is ac- 
tually received by the party within the time specified in this chap- 
ter it will be sufficient, though not sent? in accordance with re- 
quirements of this section. 

C. S., 8. 3090; Rev., a. 2258; 1SB9, r. 733, s. 108 

Bills and NotM §414. When tlie drawer of a bill dates a notu it » pir- 
ticular place, aa for inataiice "Danville," notice to him of tin d^sliouor 
of the bill, direeted to Iiim at that place, may be sufGiient But it is othpr- 
wise as to the indorsee, who doea not deeignate in hia indoraement blB 
place ot reeidenee, either generally or specially. The general riik ib that 
notice of the dishonor of a bill of exchange or promissory note indoraed, 
where the parties live in different places, must be sent by the next post, 
directed to the place of the partv'a residence. — Denny \ Palmer, 27 \ C. 
610. 

Bllla and Notes §414. Tlie riilc that notice to a distant indorser jlionii! 
be sent to the postoffice nonresl (o hia residence was founded on the pri'- 
anmption that the information would most speedily bi, giien in such «ay; 
but the rule is subject to modification; aud the true inquiry is, w i-j tliu 
notice directed to that postoffice which was most likely to impart to the 
indorser the earlieat intelligence, though it mav not be the ne-irest if it 
was, it is sufficient.— Banli of the U. 8. v. Lane, 10 N C 4^3 

427. Waiver of notice. Notice of dishonor may be waned 
either before tlio time of giving notice has ani\ed or after the, 



after the, 



224 North Carolina Corporation Cora 

omission to give due notice, and tbe waiver may be express or 
implied. 

C. S., e. 3091; Bev., b. 2259; 1899, c. 733, a. 109. 

Bills and KotM §408. In an action oil a proniBBorj' note agaioBt as iu- 
dorser, the burden is on plaintiff to show notice of dishonor to the indorser 
or waiver of aneh notice by him. — Washington Horse Eieh. Co. v. Bonner, 
180 N. C. 20, 103 8. E. 907. 

BUlB And Notas § 122. An indorser of a note maj waive notice of dis- 
honor before or after the maturity of the instrnmenl:, so that a letter tend- 
ing to show that indoiser agreed to collect the note is competent evidence 
on the iasne of waiver of notice. — Ibid. 

Bills and Notos §122. An indoraer of a note before maturity who, by 
its terms, consents to any extension of time thereon that may be granted, 
and waives notice of such extension, waives notice of nonpayment and dis- 
honor at the end of the extension. — First Nat. Bank of Henderson v. John- 
son, 169 N. C. 526, 86 B. E. 360. 

Bills and Notes §422. Although protest is not necessary on an inland bill, 
yet its waiver in such case, is construed to signify as much as when applied 
to foreign bills. So, where protest was waived on inland bill, and no notice 
was given of its nonacceptance and nonpayment to the indorsers, held, that 
such notice was waived by the waiver of protest, and the indorsers were 
Uable.— Shaw Bros. v. McNeill, 95 N. C. 535. 

Bills and Notes § 422. A promise or a partial payment by nn iodorser 
of a bill of exchange, after he has been released from liability by the neg- 
lect of tbe holder to notify him of its dishonor, to pay the whole, or even a 
part, of the sum named in the bill, if made with a full knowledge that he 
has been released by such neglect, will operate as a waiver, and bind bim 
to the payment of the whole sum named in the bill. — Ibid. 

Bills and Notes, §422. If the indorser of a bill of exchange, with knowl- 
edge of the material facts which discharge him, promises to pay such bill, 
he is bound to do so. — Lilly v. Petteway, 73 N. C. 35S. 

428. Who affected hy waiver. Where the waiver is embodied 
in the instrument itself it is binding upon all parties, but where it 
is written above the signature of an indorser it binds him only, 

C. S., B. 3093; Rev., s. 2260; 1899, c. 733, s. 110. 

Bills and Notes § 422. An indorser of a note before maturity who, by its 
terms consents to any extension of time thereon that may be grunted, and 
waives notice of such extension, waives notice of nonpayment and dis- 
honor at the end of such extension. — First Nat, Bank of Hendersou v, 
Johnson, 169 N. C. 526, S6 S. E. 360, 

429. Waiver of protest. A waiver of protest, whether in the 
case of a foreign bill of exchange or other negotiable instrument, 
is deemed to be a waiver not only of a formal protest, but also 
of a presentment and notice of dishonor. 

C. S., s, 3093; Bev., b, 2261; 1899, c. 733, s. 111. 

BUla and Notes §422. Even in foreign bills, the protest may be waive<), 
■ " 8 done, it also waives presentment and notice. — Shaw Bros, v. 
€. 535. 

Bills and Notes § 422. Where a settling partner, after the dissolution of 



North Cabolina Corporation Code 226 

the firm, gives & draft in paytnest of a partnerBhip debt, Le caoiiot waive 
protest so aa to bind bis former co-partuer, especiallj' when the latter has 
been a dormant nembeT. — Mauney ft Son v. Coit, SO N. C. 300. 

430. When notice is dispensed vitb. Notice of dishonor is dis- 
pensed with when, after the exercise of reasonable diligence, it 
cannot be given to or does not reach the parties sought to be 
charged. 

C. S., a. 3094; Rev., a. 2262; 1B99, c. 733, a. 112. 
Bunyo n v. Montfort, ,44 N. C. 371. 

431. IMaj in giving notice. Delay in giving notice of dis- 
honor is excused when the delay is caused by circumstances be- 
yond the control of the holder and not imputable to his default, 
misconduct, or negligence. When the cause of delay ceases to 
operate, notice must be given with reasonable diligence. 

C. 8^ s. 3095; Rev., a. 2263; 1899, c. 733, a. 113. 

432. When notice need not be given to dnwer. Notiee of dis- 
honor is not required to be given to the drawer in either of the 
following cases: (1) Where the drawer and the drawee are the 
same person; (2) where the drawee is a fictitious person or a 
person not having capacity to contract; (3) where the drawer 
is the person to whom the instrument is presented for payment; 
(4) Tvhere the drawer has no right to expect or require that the 
drawee or acceptor will honor the instrument; (5) where the 
drawer has countermanded payment. 

G. 8., 8. 3096; Rev., 9. 2264; 1699, c. 733, b. 114. 

Bllla and Hot«S §114. Generatly, if the drawer of a bill hus no rpason- 
able ground to expect it to be honored, the holder is not bound to strict 
preaeotment and notice; bat if the drawer has funds in the bands of the 
drnwee, be has a right to expect his bill to be honored by applyiug thereto 
tbe fanda belonging to the drawer or otherwise; and the drawer is entitled 
to presentment of his bill in reasonable time and strict notice if dialiouored, 
although the drawer knew or had reason to believe when he drew tbe bill 
that the drawee was insolvent. — Cedar Falls Co. v. Wallace Bros., 83 N. C. 
2S5. 

Bllla and NotM §414. A drawer of a bill, who has no funds in the 
hands of the drawee, is liable without notice, on the ground of fraud. — 
Benny v. Palmer, 27 N. C. 610. 

Bills and Notes §496. The burden of proving that a draft was in fact 
aeeomniDdation paper, and tbe drawer, therefore, not entitled to notice of 
dishonor, is upon the holder. — National Bank v. Bradley, 117 N. C. 'S26, 
23 8. E. 455. 

433. When notice need not be given to indorser. Notice of dis- 
honor is not required to be given to an indorser in either of the 
followin(^ eases: (1) Wliere the drawee is a fictitious person or 
a person not having .capacity to contract, and the indorser waa 



226 North Cabolina Cobposation Code 

aware of the fact at the time he indorsed the instrument; (2) 
where tlie indorser is the person to whom the instrument ia pre- 
sented for payment; (3) where the instrument was made or ac- 
cepted for his accommodation. 

0. S., s. 3097; Hev., s. 2205; 1899, c. 733, e. 115. 

Bills Uld Ntftw §414. Although at the time of the indorsement of a note. 
tbe indoraers had reason to believe, and did believe, that the note woald 
not be paid by the maker, this oircunistMiee does not diBpense vitb th« 
ueeeasity of a due notice. — Denny t. Palmer, 27 N. G. 610. 

Bat a drawer of a bill, who has uo funds iu tbe hands of the drawee, is 
liable without notice on the ground of fraud. If a note is made for tfie 
accommodation of the payee, and he receives the money for it, he is not 
entitled to notice. If a maker of a note places efTects in the hands of the 
indorser to meet tbe not^, the latter is not entitled to notice. — Ibid. 

434. Notice of nonpayment where acceptance refused. Where 
due notice of dishonor by nonacceptance has been given, notice of 
a subsequent dishonor by nonpayment is not necessary unless in 
tbe meantime the instnunent has been accepted. 

C. a., a. 3098; Bev., s. 2266; 1899, c. 733, s. 116. 

435. Efifect of omisBion to give notice of nonacceptance. Ad 
omission to give notice of dishonor by nonacceptance does not 
prejudice the rights of a holder in due course subsequent to the 
omission. "■ 

C. B., B. 30B9; Eev., B.-2267; 1899, c. 733, b. 117. 

436. When protest need not be made ; when it must be made. 
Where any negotiable instrument has been dishonored, it may be 
protested for nonacceptance or nonpayment as the case may be, 
but protest is not required except in the case of foreign hills of 
exchange. 

C. S., 8. 3100; Bev., a. 2368; 1809, «. 733, a. 118. 

BlllB ajid NotM % 411. In the case of an inland bill protvst ia not uoc^- 
sary but notice of dishonor must be given with the same promptness &a of 
a protest. — Nat. Bank of Asheville v. Bradley, 117 N. C. 526, 23 8. E. 455." 

Bills anA NotM §411. Protest ia not necessary to fix the drawoe and 
indoraers of inland bills of exchange with liability, although it is neceBear; 
in the case of foreign billa.— Shaw Bros. v. McNeill, 95 N, C. 535. 

NOTE: It is lawful for a note or bond to provide for waiver of protest 
and of notice of nonpayment, dishonor nxiA protest, and for waiver of all 
other notices required by law to be given to sureties and indorsers. The 
note may also lawfully contain the consent of makers, sureties and indorsers 
to remain bound for the paj-ment of the note and interest bo long as any 
part thereof may remain unpaid; notwithatajiding any extension of time or 
indulgence which may be granted by payee or assigns to the maker thereof. 
A. clause may be inserted giving the consent of makers and indorsers to any 
such extensions of time for payment of note, or other indulgences, as may 
thereafter be granted to the maker of said note. Our courts have upheld nil 
tliese clauses. 



sdbyCoO^Ic 



North Carolina Corporation Code 227 

Bnt there are three clauseg sonetioiea inierted in a note or bond, which 
•re distinctly objectioaable. They are waiver of homestead and personnl 
property eieniptioni agreement to pay attorney's fees; and ngreemcnt to 
eonsent to entry ol jndgTnent. NoBe of these elauses should be included in 
any note made or negotiated in this state. They are not only void and un- 
enforceable in court, but there are other incidt^nts which ninko thp usp of 
these clansea wholly undesirable. 

ART. 9. DISCHARGE. 

437. How infltniment dischargred. A negotiable instrument is 
discharged (1) by payment in due course by or on behalf of the 
principal debtor; (2) by payment in due course by the party ac- 
commodated, where the instrument is made or accepted for ac- 
commodation; (3) by the intentional cancellation thereof by the 
holder; (4) by any other act which will discharge a simple con- 
tract -for the payment of money; (5) when the principal debtor 
becomes the holder of the instrument at or after maturity in his 
own right. 

C, 8., s. 3101; Bev., s. 2269; 18B9, c. 733, s. 119. 

BIUb and Notes g4S7. Giving up a note ti 
held as complete a discharge of his liability a 
—Miller v. Tharel, 75 N. C. 148. 

4S8. Discharge of person secondarily liable. A person second- 
arily liable on the instrument is discharged (1) by any act which 
discharges the instrument; (2) by the intentional cancellation of 
his signature by the holder; (3) by the discharge of a prior party; 
(4) by a valid tender of payment made by a prior party; (5) by 
a release of the principal debtor, unless the holder's right of re- 
course against the party secondarily liable is expressly reserved ; 
(6) by any agreement binding upon the holder to extend the time 
of payment or to postpone the holder's right to enforce the instru- 
meot, unless made with the assent of the party secondarily liable 
or unless the right of recourse against such party is expressly re- 
served. 

C. S., B. 3102; Bev., s. 2270; 1809, c. 733, s. 120. 

Billa and Notes gl87. In an action upon a negotiable instrument the 
defendants on its fave being joint makers, the mere fact that the plaintiff 
had told one of the defendants, without the knowledge of the other, "that 
he would' take up and carry the note until fall," is not an extension of 
vmjraeat for a fixed and definite period," which would operate as a re-' 
lease to anch other from liability.— Bob erBOn-EufSn Co. v. Spain, 173 N. 0. 
23, 91 B. E. S61. 

Bills and Motes g 191. Where one whose name appeared on a note admit- 
ted exeeation and nonpayment, the burden is upon bim to prove any mat- 
ter in release. — Ibid. 

BUls and Notes g 137. There is no implied authority given to n cashier 



228 North Carolina Corporation Code 

of a bank, bj virtne of hia office, to release, without consideration, one of 
the joint makers from his liability on a note given to the bank; and when 
it is shown that the cashier agreed that if one of the two makers of a part- 
nership note paid a certain amount upon a well-secured note given by the 
other individually to the bank, such other maker would bo released from 
all liability on the joint note sued on, the traDsactioa is without consid- 
eratioa and the bank is not bound thereby. — Nat. Bank of Lumberton v. 
Lennon, 170 N. C. 10, 86 S. E. 715. 

Bills sjid NotM g 430. Renewal note is not payment of original indebt- 
edness, unless so intended.— Nat. Bank of Oraliam v. Hall, 174 N. C. 477, 

93 S. E. 981. 

Bills and Notes § 396. One indorsing note in blank before delivery with- 
out indicating his intention to be bound otherwise, iB an "indorser" who, 
not being given notice of nonpayment and dishonor, is discharged. — J. W. 
Perry Co. v Taylor Bros., 148 N. C. 362, 62 S. E. 423. 

Bills and Notes § 256. Surrender of collateral deposited with the holder 
by the maker of a note to secure it, without the consent of an accommoda- 
tion indorser, operates to release the indorser pro tanto. — Bank of Fayette- 

ville V. Nimoeks, 124 N. C. 352, 32 8. E. 717. 

Priaclpal and SoiMt S US. Where plaintiffs either owning or having » 

lien on vehicles in bankrupt's possession, the value of which largely ex- 
ceeded renewal notes given for the price on which defendants were sureties, 
voluntarily discharged the lien and released the vehicles to bankrupt's trus- 
tee, defendants were discharged from liability on the notes. — Brown Car- 
riage Co. V. Dowd, 155 N. C. 307, 71 S. E. 721. 

Bills and Notes §1S7. Agreement by holder of note with maker and 
with others by which he was to credit payment of the balance by such 
other parties, under which he withheld a deed executed to one <)f the 
parties until payment of that party's share, held not to amount to a dis- 
charge of the maker before payment as agreed. — Ponder v. Green, 161 
N. C. 50, 76 S. E. 632. 

439. Right of party paying instrument. When the instnimeot 
is paid by a party secondarily liable thereon it is not discharged -, 
but the party so paying it is remitted to his former rights as re- 
gards all prior parties, and he may strike out hie own and all sub- 
sequent indorsements, and again negotiate the instniment, except 
(1) where it is payable to the order of the third person and has 
been paid by the drawer; and (2) where it was made or accepted 
for accommodation and has been paid by the party accommo- 
dated. 

C. 8., s. 3103; Eev., s. 2271; 1899, c. 73S, s. 121. 

Bills and Notos §440. The person secondarily liable may pay the note 
and sue the principal, or give notice to the holder to sue. — BobersoD-Ruffin 
Co. V. Spain, 173 N. C. 23, 91 S. E. 361. 

Bills and Notes §440. The maker of a note who has paid it becomes the 
owner thereof and is entitled to its possession, as between the immediate 
parties, and may maintain his action therefor. — Walter v. Earnhardt, 171 
N. C. 731, 88 S. E. 753. 

Bills and Notes g 440. An indorser who pays off and discharges the note 



North Cabolima Cobporation Cora: 229 

nctually paid 

440. Seniinciation by bolder. The holder may expressly re- 
nounce his rights against any party to the instrumeiit before, at 
or after its maturity. Ad absolute and unconditional renuncia- 
tion of bis rights against the principal debtor made at or after the 
maturity of the instrument discharges the instrument. But a re- 
nunciation does not affect the rights of a holder in due course 
without notice. A renunciation must be in writing, unless the in- 
strument is delivered up to the person primarily liable thereon. 

C. a, B. 3104; Rev., ■. 2272; 1S99, c. 733, b. 122. 

441. Unint^ntioiial cancellation; burden of proof. A cancella- 
tion made unintentionally or under a mistake or without the au- 
thority of the holder is inoperative, but where an instrument or 
any signature thereon appears to have been canceled the burden 
of proof lies on the party who alleges that the cancellation was 
made unintentionally or under a mistake or without authority. 

C. a, ■. 3105; Rev., a. 2273; 1899, c. 733, 8. 123. 

4^. Effect of alteration of instrument. Where a negotiable 
instrument is materially altered without the assent of all parties 
liable thereon, it is avoided except as against a party who has 
himself made, authorized, or assented to the alteration, and sub- 
sequent indorsera. But when an instrument has been materially 
altered and is in the hands of a holder in due course not a party 
to the alteration he may enforce payment thereof according to its 
original tenor, 

C. 8., s. 3108; Rev., b. 2274; 1899, c. 733, e. 124. 

BIUb and Notea g378. The legal acceptation of the term "an alteration 
in writing" implica a change made after its execution, and while an erasure 
or interlineation ma7 bo an alteration, it is not such if made before the final 
execution of the writing,— Wicker v. Jones, 159 JJ. C. 102, 74 S. E. 801. 

Bills and Notes g 378. The addition of the words ' ' at ten per cent " to a 
bond without consent of the parties thereto, is a material alteration and va- 
cates the eame; and where such alteration is made, a presumption of fraud 
" s uniil rebutted. — Long v. Mason, 84 N. C. 16. 



Bllla uid Notes g 378. The alteration of a bill or note in a material part 
vacates the biU or note, except as between the parties consenting to such 
alteration. — Davis v. Coleman, 29 N. C. 424. 



Bills and Notes §378. The addition of the words "in specie" after the 
vrord "dollars" in a sealed note is a material alteration; and when done 
b7 the principal therein, in the absence of the surety and without his eon- 
sent, avoids such note as to the latter.—Darwin v. Rippey, 63 N. C. 318. 

443. What conatituteB a material alteration. Any alteratl^lc 



230 North Carolina Corporation Com 

which changes (1) the date; (2) the sura payable either for prin- 
cipal or interest; (3) the time or place of payment; (4) the num- 
ber or the relation of the parties; (5) the medium or currency in 
which payment is to be made; or which adds a place of payment 
where no place of payment is specified, or any other change or ad- 
dition which alters the effect of the instrument in any respect, is 
8 material alteration. 

C. 8., i. 3107; Bey., 8. 2375; 1899, c. 733, ■. 125. 

Bills and Notes g 378. Cutting oS the name of a 
promisBory oote, and Bubatitutiag another, '~ 
vis V. Coleman, 29 N. C. 424. 

Bills And NotBS |37B. Tlie addition of the words "in specie" after the 
word "dollars" in a Healed iioto is a matcriat alteration; %nd when done 
by the principal therein, in the absenee of the surety and without his con- 
sent, avoids Bueh note as to the latter.— Darwin v. Hippey, 63 N. C. 318. 

ProGxinft the words "Pleasant Valley, S. C," 
he note.— Houston v. Potts, C4 X. C. 33. 

ART. 10. BILLS OF EXCILANGE. 

444. Bill of exchange defined. A bill of exchange is an uncon- 
ditional order in writing, addressed by one person to another, 
signed by the person giving it, requiring the person to whom it 
is addressed to pay on demand or at a fixed or determinable fu- 
ture time a sum certain in money to order or to bearer. 

C. S., 8. 3108; Rev., s. 3276; 1899, c. 733, s. 126. 

Banks and Banking §98. An "aeceptanco" is a bill of eichaage.— 
Sherrill v. Amerii^an Trust Co., 176 N. C. 591, 97 S. E. 471; Standard Trust 
Co. V, Commercial Nat. Bank, 166 N. C. 112, 81 S. E. 1074; .Tohuson v. Las- 
siter. 15.^ X. C. 47, 71 S. E. 23. 

445. Bill not an assignment of funds in hands of drawee. A 
bill of itself does not operate as an assignment of the funds in 
the hands of the drawee available for the payment thereof, and 
the drawee is not liable on the bill unless and until he accepts 
the same. 

C. S., s. 310B; Rev., a. 2277; 1899, r. 733, s. 127. 

446. Bill addressed to more than one drawee. A bill may be 
addressed to two or more drawees jointly, whether they are part- 
ners or not, but not to two or more drawees in the alternative or 
in succession. 

C. 8., a. 3110; Rev., s. 3278; 1890, c. 733, a. 128. 

447. Inland and foreign bills of exchange. An inland bill of ex- 
change is a bill which is or on its face purports to be both drawn 
and payable within this state. Any other bill is a foreign bill. 



North Cabolina Coepoeation Code 231 

Unless the contrary appears on the face of the bill the holder may 
treat it as an inland bill. 

C. S., B. 3111; Bev., e. 2379; 1899, e. 733, b. 129. 

Sherrill V. American Trust Co., 176 N. C. 591, 97 8. E. 471. 



448. When bill may be treated as promissory note. Where in 
a bill drawer and drawee are the same person, or where the 
drawee is a fictitious person or a person not having capacity to 
contract, the holder may treat the instrument, at his option, either 
as a bill of exchange or a promissory note. 

C. S., B. 3112; Bev., s. 2280; 1899, e. 733, e. 130. 

Sherrill v. American Trust Co., 176 N. C. 591, 97 8. E. 471. 

449. Referee in caw of need. The drawer of a bill and any in- 
dorser may insert thereon the name of a person to whom the 
holder may resort in ease of need : that is to say, in case the bill 
is dishonored by nonaceeptance or nonpayment. Such person is 
called the referee in ease of need. It is in the option of the holder 
to resort to the referee in case of need or not, as he may see fit. 

C. S., B. 3113; Bev., s. 2281; 1899, c. 733, b. 131. 

AKT. 11. ACCEPTANCE. 

460. Acceptance defined ; how made. The acceptance of a bill 
is the signification by the drawee of his assent to the order of the 
drawer. The acceptance must be in writing and signed by the 
drawee. It must not express that the drawee will perform his 
promise by any other means than the payment of money. 

C. 8., a. 3114; Bev., a. 2282; 1899, c. 733, b. 132. 

BiUl and HotM g 86. The authority' to draw, u<;i-e|>t or iiitlorBe billu, notes 
•nd checks nil! not readily be implied as an incident to tlie express author- 
ity of an agent. It most ordinarily be conferred expressly, but it may be 
implied, if the eief,ution of the pnper is a necesRary inritlent to the business, 
that is, if the purpose of the agency CBunot otbenvise be aecompUshed. — 
Bask of Uorganton v. Hay, 143 N. C. 326, S5 S. £. 811. 

461. Holder entitled to acceptance on face of bill. The holder 
of a bill presenting the same for acceptance may require that the 
acceptance be written on the bill, and if such request is refused, 
may treat the bill as dishonored. 

C. S., B. 3115; Bev., a. 228S; 1899, e. 733, s. 133. 

462. Acceptance by separate instnunent. Where an acceptance 
is written on a paper other than the bill itself it does not bind the 
acceptor exeept in favor of a person to whom it is shown and who, 
on the faith thereof, receives the bill for value. ^ ~ r 

C. S., s. 3116; Rev., a. 2284; 1899, c. 733, a. 134. r.Kiiiz^dDv VjOO^IC 



232 North Cabolina Corporation Code 

BUls Mid Notes gSS. A letter written within & reasonable time before 
or after the dale of a bill of exchange, describing it in terms not to be mis- 
taken, and promising to accept it, is, if shown to the person who afte'r- 
nards takes the bill on the credit of the letter, a virtual acceptance, bind- 
ing the person who makes the promise. — Bank of Morganton v. Uav, 143 
N. C. 326, 55 8. B. 811. 

Nimocks v. Woody, 97 N. C. 1. 

463. Wben promise to accept eqnivaleDt to acceptance. An un- 
conditional promise in writing to accept a bill before it is drawn 
is deemed an actual acceptance in favor of every person who, upon 
the faith thereof, receives the bill for value. 

C, S.", 8. 3117; Rev., b. 2285; 1899, c. 733, s. 135. 

'. Hay, 143 N. C. 328, 55 8. E. 811; Nimoeks v. Woody, 

BUls and Notee g93. The release of the drawer of an order is a sufficient 
consideration for an acceptance of the order. — Craig & Wilson v. Stewart 
& Jones, 163 N. C. 531, 79 8. E. 1100. 

454. Time allowed drawee to accept. The drawee is allowed 
twenty-four hours after presentment in vrhich to decide whether 
or not he will accept the bill, but the acceptance, if given, dates a8 
of the day of presentation. 

C. 8., s. 3118; Rev., s. 2286; 1899, c. 733, s. 136. 

456. ZJability of drawee retauung or destroying bill. Where 
a drawee to whom a bill is deJivered for acceptance destroys the 
same or refuses within twenty-four hours after such delivery, or 
within such other period as the holder may allow, to return the 
bill accepted or nonaccepted to the holder, he will be deemed to 
have accepted the same. 

C. 8., s. 3119; Rev., b. 2287; 1899, c. 733, b. 137. 

456. Acceptance of incomplete biU. A bill may be accepted be- 
fore it has been signed by the drawer or while otherwise incom- 
plete, or when it is overdue, or after it has been dishonored by a 
previous refusal to accept, or by nonpayment. But when a bill 
payable after sight is dishonored by nonacceptance and the drawee 
subsequently accepts it, the holder, in the absence of any differ- 
ent agreement, is entitled to have the bill accepted as of the date 
of the first presentment. 
C. 8., s. 3120; Rev., s. 2288; 1899, c. 733, e. 138. 

467. Kinds of acceptances. An acceptance is either general or 
qualified. A general acceptance assents without qualification to 
the order of the drawer. A qualified acceptance in express terms 
varies the effect of the bill as drawn. 

C. e., B. 3121; Rev., s. 2289; 1899, c. 733, s. 139. lui^doXjOCWlc 



North Carolina Corporation Code 233 

468. Wbai oonstitiites a ffeaeral acceptance. An acceptance to 
pay at a particular place is a general acceptance unless it ex- 
pressly states that the bill is to be paid there only, and not else- 
where. 

C. S., s. 3122; Rev., s. 2290; 1S99, c. 733, a.' 140. 

459. What oonstitates a qualified acoeptanee. An acceptance 
is qualified which is (1) conditional; that is to say, which makes 
payment by the acceptor dependent on the fulfilment of a con- 
dition therein stated,- (2) partial; that is to say, an acceptance to 
pay part only of the amount for which the bill is drawn; (3) lo- 
cal ; that is to say, an acceptance to pay only at a particular place ; 
(4) qualified as to time ; (5) the acceptance of some one or more 
of the drawees, but not of all. 

C. 8., 8. 3123; Eev., s. 3291; 1899, c. 733, s. 141. 

Bills Mid Not«s gS3. Where a draft is acceoted payable "when I re- 
ceive funds to the use of" the drawer,, the acceptor !■ liable when tha 
moneys have boen placed to his credit, though he has not taken maniiaJ 
possession. — Wallace Bros. v. Douglass, 116 N. C. 659, 21 S. E. 3S7. 

Bills and Notes § 83. Where pergona accept an order upon the condi- 
tion that they will pay on it, if they are indebted to the drawer, the 
amount of their indebtedncBs, and it develops that they owed bim nothing 
at the time of the acceptance, they are not liable; but, where it develops 
that they owed him something, they are liable to the extent of such in- 
debtedness not exceeding the amount of the order and accrued interest. — 
Craig & Wilson v. Stewart & Jones, 163 N. C. 531, 79 8. E. 1100. 

460. Bights of parties as to qualified acceptance. The holder 
may refuse to take a qualified acceptance, and if he does not ob- 
tain an unqualified acceptance he may treat the bill as dishonored 
by nonacceptance. When a qualified acceptance is taken the 
drawer and indorsers are discharged from liability on the bill un- 
less they have expressly or impliedly authorized the holder to take 
a qualified acceptance or subsequently assent thereto. When the 
drawer or an indorser receives notice of a qualified acceptance he 
must, within a reasonable time, express his dissent to the holder 
or he will be deemed to have assented thereto. 

C. S., a. 3124; Bev., a. 2292; 1S99, c. 733, s. 142. 

ART. 12, PRESENTMENT FOR ACCEPTANCE. 

461. When presentment for accq>tance moat be made. Pre- 
sentment for acceptance must be made (1) where the bill is paya- 
ble after sight, or in any other case where presentment for ac- 
ceptance is necessary in order to fix the maturity of the instru- 
ment; or (2) where the bill expressly stipulates that it shall be 
presented for acceptance; or (3) where the bill is drawn paya- 

DidilizedbyCoO^IC 



234 North Carolina Corporation Codb 

ble elsewhere than at the residence or place of buainess of the 
drawee. In no other case is presentment for acceptance necessary 
in order to render any party to the bill liable. 

C. S., s. 3125; Bev., a. 2293; 189&, c. 733, s. 143. 

Bills and Notes gsas. Where an unaccepted sight draft, indorsed: "Ac- 
cepted, payable at P. & M. Bank ' ' is sought to be proseuted two days be- 
fore maturity, the conclusive presumption U that the presentment was to 
be for aeceptance, and not payment. — Burnut v. Life Ini. Co., 124 N. C. 9, 
32 a. E. 323. 

462. Failure to present in reasonable time dischai^es drawer 
and indorsers. Except as herein otherwise provided, the holder 
of a bill which is required by the next preceding section to be pre- 
sented for acceptance must either present it for aeceptance or ne- 
gotiate it within a reasonable time. If he fail to do so the drawer 
and all indorsers are discharged, 

C. 8., 8. 3126; Bev., s. 2294; 1899, c. 733, s. 144. 

463. How presentment made. Presentment for acceptance mtist 
be made by or on behalf of the holder, at a reasonable hour on a 
business day and before the bill is overdue, to the drawee or some 
person authorized to accept or refuse acceptance on his behalf; 
and (1) where a bill is addressed to two or more drawees who are 
not partners, presentment must be made to them all, unless one 
has authority to accept or refuse acceptance for all, in which case 
presentment may be made to him only; (2) where the drawee ift 
dead, presentment may be made to his personal representative; 
(3) where the drawee has been adjudged a bankrupt or an in- 
solvent or has made an assignment for the benefit of creditors, 
presentment may be made to him or to his trustee or assignee. 

C. S., a. 3127; Hev., s. 2295; 1899, c. 733, a. 145. 

Bills and Notes §406. A draft payable at no particular place in a city 
□r town, muat be presented at the maker's residence or place of business, it 
he has sueh, and if he has not, then the presence of the instrument in th? 
place is a sufficient presentation. — People's Nat. Bank of Fayetteville v. 
Lutterloh, 95 N. C. 495. 

464. Pn what days presentment ma^ be made. A bill may be 

presenteil for acceptance on any day on which negotiable instru- 
ments may be presented for payment under the provisions of this 
chapter, 

C. S., s. 3128; Kev., s. 2296; 1899, c. 733, s. 146; 1909, r. 800, s. 1. 

466. Presentment where time is insufficient. Where the holder 
of a bill drawn payable elsewhere than at the place of business or 
the residence of the drawee has not time with tlie exercise of rea- 
sonable diligence to present the bill for acceptance before present- 

DidilzedbyCoOglC 



North Cabolina Corforation Code 236 

ing it for payment on the day that it falls due, the delay caused by 
presenting the bill for acceptance before presenting it for pay- 
ment is excused and does not discharge the drawers or indorsers. 
C. S., B. S129; Rev., b. 2267; 1899, c. 733, 8. 147. 

466. Where preBentment is exonsed. Presentment for accept- 
ance is excused and a bill may be treated as dishonored by nonac- 
ceptance in either of the following cases: (1) Where the drawee 
is dead or has absconded or is a fictitious person or a person not 
having capacity to contract by bill; (2) where after the exercise 
of reasonable diligence presentment cannot be made; (3) where, 
although presentment has been irregular, acceptance has been re- 
fused on some ground. 

C. S., s. 3130; Rev., b. 2298; 1899, c. 733, b. 148. 

467. When dishonored by nonacceptance. A bill is dishonored 
by nonacceptance (1) when it is duly presented for acceptance 
and such an acceptance as is prescribed in this chapter is refused 
or cannot be obtained; or (2) when a presentment for accept- 
ance is executed and the bill is not accepted. 

C. 8., ». 3131; Rev., s. S299; 1899, c. 733, ». 149. 

468. Duty of bolder, where bill not accepted. Where a bill is 
duly presented for acceptance and is not accepted within the pre- 
scribed time, the person presenting it must treat the bill as dis- 
honored by nonacceptance or he loses the right of recourse against 
the drawer and indorsers. 

C. a., s. 3132; Bev., b. 2300; 1899, r. 733, a. 150. 

469. Bights of bolder, where bill not accepted. When a bill is 
dishonored by nonacceptance an immediate right of recourse 
against the drawers and indorsers accrues to the holder, and no 
presentment for payment is necessary. 

C. S., B. 3133; Bev., s. 2301; 1899, c. TS3, s. 101. 

ART. 13. PROTEST. 

470. In what cases protest necessary. Where a foreign bill ap- 
pearing on its face to be such is dishonored by nonacceptance, it 
must be duly protested for nonacceptance; and where such a bill 
which had not previously been dishonored by nonacceptance is 
dishonored by nonpayment, it must be duly protested for nonpay- 
ment. If it is not so protested the drawer and indorsers are dis- 
charged. Where a bill does not appear on its face to be a foreign 
bill, protest in case of dishonor is unnecessary. 

C. S., 8. 3134; Rev., s. 2302; 1890, .-. 733, s. 152. 

DidilzedbyCoO^IC 



236 NOKTH CaBMJHA COKPOKATION CWK 

Mk «a< VotM 1 411. ProlMt ia ■cccasuj in the cmc of f nrvigB bilK 
but pratm inaj be waived, Uld wbea thu ia done it also waives pro^t- 
ment aad notice. — Shaw Bros. r. McNeill, 95 N. C. 535. 

471. Bow protect mmde. The protest must be annexed to the 

bill or must cmlain a copy thereof, and most be under the hand 
and seal of the notary making it, and most specify (1) the time 
and place of presentment; (2) the fact that presentment was 
made and the manner thereof; (3j the eaose or reason for pro- 
testing the bill; (4; the demand made and the answer given, if 
any, or the fact that the drawee or acceptor coold not be found. 
C. 8., i. 3135; Bev., a. 2303; 1899, c. 733, b. 153. 

473. By whom protett made. Protest may be made by (1) a 

notary public; or (2j by any respectable resident of the place 
where the bill is dishonored, in the presence of two or more cred- 
ible witnesses. 

C. S., a. S136; Bev., i. 2304; 1S99, e. 733, a. 154. 

473. Wlien protest to be mad*. When a bill is protested, such 
protest must be made on the day of its dishonor, unless delay is 
excused as herein provided. When a biU has been duly noted the 
protest may be Hupsequently extended as of the date of the noting. 

C. 8., e. 3137; Bev., a. 2305; 1899, c. 733, t. 155. 

474. Where protest made. A bill must be protested at the place 
where it is dishonored, except that when a bill drawn payable at 
the place of business or residence of some person other than the 
drawee has been dishonored by nonacceptance it must be pro- 
tested for nonpayment at the place where it is expressed to be 
payable, and no further presentment for payment to or demand 
on the drawee ia necessary. 

C. 8., B. 3138; Kev. b. 2306; 1899, c. 733, a. ISO. 

476. Protest both for nonacceptance and nonpajrment. A bill 
which has been protested for nonacceptance may be subsequently 
protested for nonpayment. 

C 8., 1. 3139; Rev., a. 2307; 1899, c. 733, b. 157. 

476. Protest before matorlty, where acceptor insolvent. Where 
the acceptor has been adjudged a bankrupt or an insolvent or has 
made an assignment for the benefit of creditors before the bill ma- 
tures, the holder may cause the bill to be protested for better se- 
curity against the drawer and indorsers. 

C. 8., a. 3140; Bev., a. 2308; 1S99, c. 733, a. 158. 

477. Wlien protest dispensed with. Protest is dispensed with 
by any circumstances which would dispense with notice of dls- 

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NOBTH CAKOLINA CORPOBATION GODE 237 

honor. Delay in noting or protesting is excused when delay is 
caused by circuiastances beyond control of the bolder and not 
imputable to his default, misconduet or negligence. When the 
cause of delay ceases to operate, the bill must be noted or pro- 
tested with reasonable diligence. 

C. S., B. 3141; Rev., e. 2309; 1899, c. 733, s. 159. 

478. Prot«st where bill is lost. Where a bill is lost or destroyed 
or is wrongly detained from the person entitled to hold it, pro 
test may be made on a copy or written particulars thereof. 

C. S., 8. 3142; Rev., i, 2310; 1899, e. 733, a. 160. 

ART. 14. ACCEPTANCE FOB HONOR. 

479. When a bill may he accepted for honor. Where a bill of 
escbange has been protested for dishonor by nonaeceptance or 
protested for better security, and is not overdue, any person not 
being a party already liable thereon may, with the consent of the 
holder, intervene and accept the bill supra protest for the honor 
of any party liable thereon or for the honor of the person for 
whose account the bill is drawn. The acceptance for honor may 
be part only of the sum for which the bill is drawn, and where 
there has been an acceptance for honor for one party there may 
be a further acceptance by a different person for the honor of 
another party. 

C. S., a. 3143; Rev., b. 2311; 1899, c. 733, s. 161. 

480. How acceptance for honor made. An acceptance for honor 
supra protest must be in writing and indicate that it is an accept- 
ance for honor, and must be signed by the acceptor for honor. 

C. S., 8. 3144; Rev., s. 2312; 1899, c 7S3, s. 162. 

481. When deemed an acceptance for honor of drawer. Where 
an acceptance for honor does not expressly state for whose honor 
it ie made, it is deemed to be an acceptance for the honor of the 
drawer. 

C. S., B. 3145; Rev., s. 2313; 1699, e. 733, s. 163. 

482. Liability of acceptor for honor. The acceptor for honor 
is liable to the holder and to all parties to the bill subsequent to 
the party for whose honor he has accepted. 

C. S., 8. 3146; Rev., b. 2314; 1899, e. 733, a. 164. 

483. Agreement of acceptor for honor. The acceptor for honor 
by such acceptance engages that he will on due presentment pay 
the bill according to the terms of his acceptance, provided it-shall r , 



238 N(ttTH Cabolina Coeporation COIffi 

not have been paid by the drawee; and provided, also, that it 
shall have been duly presented for payment and protested for 
Donpayment and notice of dishonor given to him. 
C. 8., H. 3147; Rev., B. 2315; 1899, t. 733, a. 163. 

484. UattirJtjr of bill payable after si^ht accepted for hotrn. 

Where a bill payable after sight is accepted for honor its maturity 
is calculated from the date of the Doting for nonacceptaDce and 
not from the date of the acceptance for honor. 

C. a, s. 3148; Bev.. ■. 2516; 1899, t. 733, b. 166. 

486. Protest of bill accepted for honor. Where a dishonored 
bill has beeo accepted for honor supra protest or contains a ref- 
erence in case of need, it must be protested for nonpayment be- 
fore it is presented for payment to the acceptor for honor or ref- 
eree in case of need. 

C. 8., B. 3149; Bev., b. 2317; 1899, <-. 733, a. 167. 

486. How presentment for payment to acceptor for honor made. 
Presentment for payment to the acceptor for honor must be made 
as follows: (1) If it is to be presented in the place where the 
protest for nonpayment was made it must be presented not later 
than the day following its maturity ; (2) if it is to be presented in 
some other place than the place where it was protested, then it 
must be forwarded within the time in this chapter specified, 

C. 8., i. 3150; Rev., b. 2318; 189B, c. 733, a. 168. 

487. When delay in makiog presentment excused. The pro- 
visions of section 3062 (herein 398) apply where there is delay in 
making presentment to the acceptor for honor or referee in case 
of need. 

C. 8., B. 3151; Bev., s. 2319; 1899, c. 733, g. 169. 

488. Dishonor of bill by acceptor for honor. When the bill is 
dishonored by the acceptor for honor it must be protested for non- 
payment by him. 

C. 8., B. 3152; Rev,, b. :;32I); 1899, c, 733, b. 170. 

ART. 15. PAYMENT FOR HONOR. 

489. Who may make payment fco* honor. Where a bill hsK been 
protested for noiipayiiiciit any person may intervene and pay it 
supra protest for the honor of any person liable thereon or for 
the honor of the person for whose account it was drawn. 

(;. 8., B. 3153; Rev., b. 2321; 1899, c. 733, b. 171. 

490. How pasmient for honor must be made. The payment for 

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North Carolina Corporation Code 239 

koBor supra protest in order to operate as Buch and not as a mare 
Tolontary payment muat be attested by a notarial act of honor, 
which may be appended to the protest or from an extension to it. 
C. B., ». 3154; Bbt., b. 2322; 1BB», e. 733, s. 172. 

401^ Declaration before payment tm honor. The notarial act 
of honor must be founded on a declaration made by the payer 
for honor or by his agent in that behalf declaring his intention 
to pay the bill for honor and for whose honor he pays. 

C. 8, B. 3165; Bev., a. 3323; 1899, c. 733, b. 173. 

492. Preference of parties offering to pay for bonor. Where 
two or more persons offer to pay a bill for the honor of different 
parties the person whose payment will discharge most parties to 
the bill is to be given the preference. 

C. S., s. 3156; Rav., s. 2324; 1899, c. 7S3, b. 174. 

493. Effect on subsequent parties, where bill is paid for honor. 

Where a bill has been paid for honor all parties subsequent to 
the party for whose honor it is paid are discharged, but the payer 
for bonor is subrogated for and succeeds to both the rights and 
duties of the holder as regards the party for whose honor he pays 
and aU parties liable to the latter. 
C. 8., a. 3157; Kev., 8. 2325; 1899, c. 733, a. 175. 

494. Where holder refuses to receive payment supra protest. 
Where ttie holder of a bill refuses to receive payment supra pro- 
test he loses his rjght of recourse against any party who would 
have been discharged by such payment. 

C. 8., H. 3158; Rev., b. 2326; 1899, c. 733, a. 176. 

4S6. Rights of payer for honor. The payer for honor on paying 
to the holder the amount of the bill and the notarial expenses 
incidental to its dishonor is entitled to receive both the bill itself 
and the protest. 

C. S., a. 3159; Bev., b. 2327; 1899, o. 733, s. 177. 

AET. 16. BILLS IN A SET. 

496. Bills in a set constitute one bill. Where a bill is drawn in 
a set, each part of the set being numbered and containing a 
reference to the other parts, the whole of the parts constitute one 
bill. 

C. 8., 8. 3160; Bev., a. 2328; 1899, c. 733, 8. 178. 

497. Sights of holders, where different parts are n^otiated. 
Where two or more parts of a set are negotiated to different 

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240 North Carolina Corporation Code 

holders in due course the holder whose title first accrues is, ah 
between such holders, the true owner of the bill. But nothing 
in this section affects the rights of a person who in due course 
accepts or pays the part first presented to him. 
C. B., 9. 3161; Kev., a. 2329; 1899, c. 733, a. 179. 

498. Liability of holder ^o indorses two or more parts of a set 
to different persons. Where the holder of a set indorses two or 
more parts to different persons he is liable on every such part, and 
every indorser subsequent to him is liable on the part he has him- 
self indorsed as if such parts were separate bills. 

C. S., B. 3162; Bev., s. 2330; 1899, e. 733, b. 180, 

499. Acceptance of bills drawn in seta. The acceptance may be 
written on any part, and it must be written on one part only. 
If the drawee accepts more than one part, and such accepted parts 
are negotiated to different holders in due course, he is liable on 
every such part as if it were a separate bill. 

C. S., H. 3163; Bev., a. 2331; ISBB, c. 73S, a. 181. 

500. Payment by acceptor of bills drawn in sets. When the 
acceptor of a bill drawn in a set pays it without requiring the 
part .bearing his acceptance to be delivered up to him, and that 
part at maturity is outstanding in the bands o£ a holder in due 
course, he is liable to the holder thereon. 

C. 8., B. 3164; Bev., a. 2332; 18B9, c. 733, b. 182. 

501. Effect of dischiu-ging one of a set. Except as herein other- 
wise provided where any one part of a bill drawn in a set is 
discharged by payment or otherwise the whole bill is discharged. 

C. 8., B. 3165; Bev., a. 2333; 1899, e. 733, s. 183. 

ART. 17. PROMISSORY NOTES AND CHECKS. 

602. Negotiable promissory note defined. A negotiable prom- 
issory note within the meaning of this chapter is an uncon- 
ditional promise in writing made by one person to another, signed 
by the maker, engaging to pay on demand or at a fixed or deter- 
minable future time a sum certain in money to order or to bearer. 
Where a note is drawn to the maker's own order it ie not com- 
plete until indorsed by hira. 

■ C. 8., 8. 3166; Bev., a. 2334; 1899, c. 733, b. 184. 

603. Check defined. A check is a bill of exchange drawn on a 
bank payable on demand. Except as herein otherwise provided 

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North Cabolina Corporation Code 241 

the provisions of this chapter that are applicable to a bill of ex- 
change payable on demand apply to a check. 

C. S., 3. 3167; Bev., «. 2335; 1899, c. 733, a. 185. 

Bills and Notes § 16. A check is a bill of excliange, and nmy more par- 
ticularly be defined as a written order on a bank or banker, purporting to 
be drawn againit a deposit of funds, for the papncnt, at all events, of u 
■um cf raoner to a certain person therein named, or to htm or his order, or 
to bearer, and payable on demand. — Standard Trust Co. v. Commerrinl Nat. 
Bank, J66 N. C. 112, 83 8. E. 474. 

Bills and NotM gSSS. Cashier's checks, whether certified or otherwise, 
are classed with biUs of ezcbange, payable on demandi and if negotiated by 
indorsement for value without notice, and within a reasonable time, a 
holder can maintain the position of a holder in due course. — Singer Mfg. 
Co. V. Summers, 143 N. C. 102, 55 S. E, 522. 

Bills uid Motes § 108. A stipulation stamped on the face of a cheek that 
it will positively not be paid to a certain company or its agents, is a valid 
restriction and binding on the holder. — Commercial Nat, Bunk of Charlotte 
V. First Nat. Bank of Gastonia, 118 N. C. 783, 24 S. E. 524. 

504. Within what time a check must be presented. A check 
must be presented for payment within a reasonable time after 
its isBue or the drawer will be discharged from liability thereon 
to the extent of the loss caused by the delay. 

C. 8., s. 3168; Bev., a. 2336; 1899, c. 733, s. 186. 

Bills and Kotas g 3BS. Where a party obtained check from a bank in this 
state end negotiated the same to a party residing in Virginia in five days 
thereafter, such negotiation was within a reasonable time. — Singer Mfg. Co. 
V. Summers, 145 N. C. 102, 55 8. E. 522. 

Bills and Notes §383. The holder of a check upon a bank, drawn before, 
but presented after, the bank's assignment for the benefit of creditors, is 
not entitled to the amount thereof as against the assignee to the extent of 
the fund so held.— Hawea v. Blackwell, 107 N. C. 196, 12 S. E. 245. 

505. Effect of certification of check. Where a check is certified 
by the bank on which it is drawn the certification is equivalent 
to an acceptance. 

C. 8., s. 3169; Bav., s. 2337; 1899, c. 733, s. 187. 

606. Effect, where holder of check procures it to be certified. 
Where the holder of a check procures it to be accepted or certified 
the drawer and all indorsers are discharged from liability thereon. 

C. 8., 8. 3170; Rev., s. 2338; 18B0, c. 733, g. 188. 

507. Check not assignment of funds. A check of itself does not 
operate as an assignment of any part of the funds to the credit 
of the drawer with the bank, and the bank is not liable to the 
holder unless and until it accepts or certifies the cheek. 

C. B., s. 3171; Bev., s. 2339; 189B, c. 733, s. 189. 

Banks and Banking g9B. The reason why the holder of a cheek.- is not. 



2^ North Carolina Corporation Code 

permitted to sue the bank has been stated hy the authorities to be, that 
there is no penalty between the holder and the bank until hy certification of 
the check or the acceptance thereof, eipresa or implied, or by any other act 
or conduct it has made itself directly liable to the holder. — Standard Troat 
Co. V. Commercial Nat. Bank, 166 N. C. 112, 85 8. E. 474. 

Banks and Banking §98. An action cannot be auitained agaiuat a bank 
by the payee of a negotiable check, tliough the drawer has funda on de- 
posit Biiflicient for its payment against which the bank has no claim. — 
Perry v. Bank of Smithfield, 131 N. C. 117, 42 S. E. 551. 

Banks and Banking § 98. The giving of a check upon a bank is not, 
unless it is accepted, an assignment of the claim of the deinDsitor, and passes 
no title, legal or equitable, to hia moneys on deposit in such bank. — Ibid. 

Bills and Notes 1 383. The holder of a check upon a bank, drawn before, 
but presented after, the bank's assignment for the beneflt of creditors, is 
not entitled to the amount thereof as against the assignee to the extent 
of the fund so h BlH— Hmnrwi v. Blackwell, 107 N. C. 196, 12 B. E. 245. 



Bank! and Banking g 181. Where plaintiff's agent deposited money to 
her credit, and the pass book was made in her name, he had no authority, 
without her knowledge or consent, to withdraw such deposit, although th« 
pass book was in the agent's poseession, and plaintiff never notified the 
bank not to pay deposit to him. — Goodloe v. Fidelity Bank, 111 S. E. 51S. 

Bills and Notes § 378. While a bank should use a protectograpb wheo 
issuing cashier's or certified checks, its failure to use snch a device, which 
resulted in the alteration of the check, is not actionable. — Broad Street 
Bank V. First National Bank of Qoldsboro. 112 S. E. 11. 



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CHAPTER VI. 

CO-OPERATIVE ASSOCIATIONS. 

Snbduptar One. BuUdlns and Loui AsBodatloiu. 

ABT. 1. ORGANIZATION. 

Section 

AppUeatioD of term 5V8 

Method of incorporation; powers S09 

Amendments to certificate 510 

Form of certificate 511 

When to begin busineas - . . . . 51i! 

Chapter on corporations applicable 513 

Charters validated 514 

ART. 2. SHARES AND SHAREHOLDEKS. 

Number of ehares and entrance fee prescribed 515 

Different claeaea of shares; guaranteed dividends 516 

Certificate issued and paj-ment enforced SIT 

New members admitted ■ S18 

Shareholders eqnally liable S19 

Harried women and minors as shareholdera 520 

ART. 3. LOANS. 

Manner of malting loans; security required 521 

Repayment at any time ' . . . . 5S2 

Power to borrow money 523 

ART. 4. UNDER CONTROL OF INSURANCE COMMISSIONER. 

Power of insurance commissioner 534 

Annual license fees 625 

Statement filed by association 526 

Statement examined, approved, and published 527 

License revoked ' . . . . 5'iS 

Examinations made; expense paid 529 

Failing to exhibit books or making false statements a misdeiiieniior 530 

Agent must obtain certificate 531 

Penalties imposed and recovered ■ - . 5S2 

ART. 5. FOREIGN ASSOCIATIONS. 

Allowed to do business 533 

Copy or charter and list of officers filed 534 

License granted 535 

Securities deposited 536 

Annual certificate; service of process 53T 

Agent must have certificate of license; fees 538 

Fees- and expenses 539 

Stock listed for taxation 5^0 

Failure to list stock for taxation a misdenicanor 541 

All contracts deemed made in this state 5*3 

Sahcliaptar Two. Land and I>oan AsBodatlona. 
ART. 6. ORGANIZATION AND POWERS. 

Application of term 543 

Incorporation and powers 544 

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244 N(ttTH CaUHJNA CCffiPOBATION CODE 

Section 

Iiosns ■ 545 

Beserve Asiociatious S48 

Subebaptw TliTM. Oi«dlt Unions. 

ART. 7. 8UPEBINTENDENT OP CO-OPERATIVE ASSOCIATIONS 
AND CREDIT UNIONS. 

Office created Sil 

Duties of the officer 548 

ART. 8. INCORPORATION OP CREDIT UNIONS. 

Application Sled 549 

Bj-lawe adopted 550 

Certificate of iocorporatioD 551 

Amendment of by-lawa 552 

Restriction of terms 553 

Change of place of buBineas 554 

ART. 9. POWERS OP CREDIT UNIONS. 

General nature of boBinesB 555 

Receive depOBils ■ . . . . 556 

Borrowing mcney 557 

Investment of funds 558 

Loans 559 

Bate of interest; penalty 560 

Beserve fund 561 

Dividends ■ ... 561i 

Voluntary dissolution 563 

Savings institution; restriction of taiatioo 564 

ART. 10. SHARES IN TEE CORPORATION. 

Ownership and transfer of shares S(iS 

Shares and deposits for minors and in trust ' 566 

Fines and penalties 567 

Liability of shareholders 569 

ART. 11. MEMBERS AND OFFICERS. 

Who may become members 569 

Expulsion and withdrawal of members 570 

Meotiugs; right of voting 571 

Election of directors and committees - 572 

Duties of board of directors 573 

Duties of credit committee • . . . 574 

Duties of supervisory committee 575 

ART. 12. SUPERVISION AND CONTROL. 

Subject to superintendent of credit nnions 576 

Annual reports; penalty "077 

Annual examinations required .... 578 

Revocation of certilicate 579 

Deficits supplied; business discontinued 580 

SubcliapteT Fonr. Oo^oporatlva Associations. 

ART. 13. ORGANIZATION OF ASSOCIATIONS. 

Nature of the association 581 

''^e of term restricted 



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NOBTH CaBOUNA COBFORATION CODE 245 
Section 

Articlea of agreement 583 

CertiScBte of incorporation S84 

Fees for incoiporation 58S 

Bj-laws adopted . . . ■ ' 686 

Qeaeral corporsitloii law applied 587 

Other corporations admitted 588 

ART. U. STOCKHOLDERS AND OFFICERS. 

CertiflcftteB for stock fullj paid 589 

Ownership of shares limited ' 590 

Shares issued on parchass of basiness 591 

Absent members voting 592 

Directors and other ofKcers 693 

ART. 15. FOWEHS AND DUTIES. 

Nature of business authorized S91 

Amendment of articles .... - S95 

Apportionment of earnings 596 

Time of distribution -597 

Reports to secretary of state 598 

Subchapter Fire. Oo-operatlve Muketlug of Fann Products. 

Declaration of policy 699 

Definitions GOO 

Who may organise 601 

Purposes 602 

Preliminary investigation 60JI 

Powers 604 

Members 605 

Articles of incorporation 606 

Amendments to articles of incorporation 607 

By-laws _. 608 

G«neral and special meetinKs;'how called 609 

Directors; election 610 

Election of officers 611 

Stock; membership certificates; when issued; voting; liability; limita' 

tion on transfer of ownership 612 

Removal of officer or director 613 

Referendum 614 

Marketing contract 615 

Purchasing business of other associatious, personSj firms or corpora- 
tions; payment; stock issued 616 

Annual reports 617 

ConSieting laws not to apply 618 

Limitation of use of term "co-operative " 619 

Interest in other corporations or associations '. 620 

Contracts and agreements with other associations 621 

Association heretofore organized may adopt the provisions of this act 622 
Misdemeanor; breach of marketing contract of co-operative associa- 
tions; spreading false reports about the finances or management 

thereof 63S 

Associations not in restraint of trade 624 

Constitutionality 625 

Application of general corporation laws 626 

Annual license fees 627 

Filing fees 



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246 NOBTH CaBOLINA Ck>RPOItATION CODE 

SUBCHAPTER I. BUILDING AND LOAN ASSOCUTIONS. 
ART. 1. ORGANIZATION. 

508. Application of term. The term "building and loan asso- 
ciation," as used in this subchapter, shall apply to and include 
all corporations, companies, societies, or associations organized 
for the purpose of making loans to its members only, and of 
enabling its members to acquire real estate, make improvemcDts 
thereon and remove incumbrances therefrom by the payment of 
money in periodical installments or principal sums, and for the 
accumulation of a fund to be returned to members who do not 
obtain advances for such purposes. It shall be unlawful for any 
corporation, company, society, or association doing business in 
this state not so conducted to use in its corporate name the term 
"building and loan association" or "building association," or in 
any manner or device to hold themselves out to the public as a 
building and loan association. 

C. S., 9. 5169; Rev., 8. 3H81; 1903, c 435, 8. 16. 

609. Method of incorporation; powers. It shall be lawful for 
any persons in any city, town, or county of this state, under any 
name by them to be assumed, to associate for the purpose of 
organizing and establishing a homestesd and building and loan 
association, and, being so associated, they shall, on complying with 
this subchapter, be a body politic and* corporate, and as such be 
capable in law to hold and dispose of property, both real and 
personal; may have and use a common seal; may choose a pre- 
siding and other officers; may enact by-laws for the regulation 
(if the affairs of such corporation, and compel the due observance 
of the same by fines and penalties; may sue and be sued, plead 
and be impleaded, answer and be answered in any court in tliis 
state, and do all acts necessary for the well ordering and good 
government of the affairs of such corporation, and shall exercise 
all and singular the powers incident to bodies politic and cor- 
porate: Provided, that before any such corporation shall be en- 
titled to the privileges of this subchapter if shall file with the 
clerk of the superior court of the coimty where such corporation 
is designed to act a copy of the certificate of incorporation of such 
corporation, signed by at least seven members, to be recorded in 
the office of such clerk, and shall pay a tax of twenty-five dollars 
to the clerk, which tax shall be paid over by the clerk to the 
treasurer of the county, to the use of the school fund of the 

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North Cabouma Corporation Code 247 

county. The clerk shall certify a copy of the charter to the iu- 



C. S., a. 5170;. Rev., g. 3877; 1903, c. 435, b. 1. 

The Oeneral Aaseiiiblj may require a corporation to pay a liesiiie tax for 
the privilege of earryiog on ita bueineBS, and forbid counties or other 
municipal rties to exact any other liccuae tax or fee. — Charlotte Building A 
Loan Asi'n v. CommiBBioners, 115 N. C. 410, 20 8. E. 526. 



610. Amendments to cratiflcate. Any addition, alteration, or 
ameDdment of the certificate of incorporation of any such cor- 
poration shall be signed, certified, and recorded as is provided 

in the preceding section. 

G. 8., 8. 5171; Kev., b. 3878; 1905, c. 435, 8. 2, 

611. Fonn of certificate. Substantially the following form 
shall be used by associations to be formed under this chapter: 

CERTIFICATE OF INCORPORATION. 

This ifl to certify that we, the uudersigned citizeua of the state of North 
Carolina, hereby associate ourselves into a building and loan association 
under attd by virtue of the proviaiona of subchapter 1, entitled Building and 
Loan Aeaoeiations, of chapter 93 of the Conaolidated Statutea of North Caro- 
lina, and by this certificate do set forth; 

First. The name of said association is to be 

Second. The location whore ita buaineaa ia to be transacted is in the 

in the county of and state of 

North Carolina, and the principal oliice of said corporiition is to be at 

No , street, in the 

of aforesaid. 

Third. The object far which aaid aaaoeiation ia formed is to enable the 
■ubacribera hereto to asaiat each other, and all who may become aaaoeiated 
with them, in making loans to ita members only, and to enable theyi to ac- 
quire real estate, making improvement thereon and removing iucumbrnnces 
therefrom by the payment of periodical inataltmenta, and to accumnlate a 
fund, to be paid by ita members who do not obtain loans for the purposes 
aforesaid when the funds of said ussociation shall amount to the aum of 
dollars per share of the first and subsequent ciasaes or 

Fourth, The amount hied aa the value of each ahare, wheu matured or 

full paid, is to be dollars. The number of shares to be Bub 

B«Tibed before said association shall begin buaiucsa shall be _.. 

The maximum number of shares iu this association at any one time to be 

in force shall be The number of shares subscribed for by 

the ineorporators is , and the number of shares subscribed for 

by each of them is as follows: 

Name Number of Shares 



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248 North Cabolina Cobporation Code 

In witneBB whereof, we have hereto set our hands and seulB, the 

day ot , A. D. 19.,.. 

(Seal.) 

(Seal.) 

(Seal.) 

(Seal.) 

(Seal.) 

Signed, sealed, and deUvered in the presence of 

C. S., B. 5172( Bev., b. 3879; 1905, c. 435, 8. 37. 

612. When to begin business. Upon filing the certificate of 
incorporation with the elerk of the superior court of the county 
where the principal ofl5ee of the corporation is located, and with 
the insurance commissioner, the company shall become a body 
politic and corporate, and shall he authorized to begin business, 
when licensed by the insurance commissioner. 

C. a, B. 5173; Hev., b. 3880; Code, s. 2297; 1907, c. 959, b. 1. 

613. Cb&pter on corporations applicable. All of the provisions 
of law relating to private corporations, and particularly those 
enumerated in the chapter entitled Corporations, not inconsistent 
with this subchapter, or with the business of building and loan 
associations, shall be applicable to building and loan associations. 

C. S., B. 5174; Rev., s. 3882. 

514. Charters validated. The charters of all building and loan 
associations heretofore organized are hereby in all respects vali- 
dated and confirmed, and all such associations shall have the 
powers and privileges of associations formed under this sub- 
chapter, 

C. S., B. 5175; Bov., 8. 3883; 1905, e. 435, a. 27. 

■ ART. 2. SHARES AND SHAREHOLDERS. 

616. Mumber of shares and entrance fee prescribed. Any cor- 
poration created under and by virtue of this subchapter shall 
have the power to declare in its certificate of incorporation the 
maximum number of shares of which the corporation shall consist 
to be in force at any time, the par value of the same, to prescribe 
the entrance fee per share to be paid by each shareholder at the 
time of subscribing, to regulate the amount of the installments to 
be paid on each share, and the time at which the same shall be 
paid and payable. 
C. S., B. 5176; Bev., a. 3887; 1905, e. 435, s. 3. 

616. Different classes of shtu-es; gnaranteed dividends. Every 
building and loan association doing business in this state shall 
be authorized to issue as many series or classes and kinds of 
shares and at such stated periods as may be provided for in its 

DidilzedbyCoOgle 



NoBTH Carolina Corporation Code 249 

charter or by-laws : Provided, the guaranteed dividends on paid-up 
or gaaranteed stock shall be less than the association is earning, 
SDd tua; have the right to share in the dividends between the 
guaranteed and the earned per centum. 

C. S., B. 5177j'Bev., b. 388B; 1905, c. 435, e. 6; 1607, c. 959, 8. 3; 1919, o. 
179, a. 3. 

517. Certificate issaed and payment enforced. Any such cor- 
poration shall have power to issue to each member a certificate of 
the sbares held by him, and to enforce the payment of all install- 
ments and other dues due to the corporation from the members or 
shareholders by such fines and forfeitures as the corporation may 
from time to time provide in the by-laws or its certificate of incor- 
poration. 

C. 8., s. 5178; Bev., b. 3888; 1B05, c. «5, 8. 4. 

618. New members admitted. Any person applying for mem- 
bership or shares in any corporation after the end of a month 
from the date of its incorporation may be required to pay, on 
subscribing, such sums or assessments as may from time to time 
be fixed and assessed in the manner provided by the corporation, 
in order to place such new member or shareholder on like footing 
\7ith the original members and others holding shares at the time 
of such application. 

C. 8., 8. 5179; Hev., s. 3886; 190S, c. 435, a. 5. 

519. Shareholdera equally liable. All shareholders of the 
serial plan shall occupy the same relative position as to debts, 
losses, and profits of the association; but this provision shall not 
prevent any association from receiving dues in advance, allowing 
such a rate of interest for the anticipated payments of dues aa 
may be agreed on by the directors. No series or class of stock 
shall be paid off until fully matured. 

C. S., 8. 5180; Bev., a. 3884; 1905, c. 435, b. 7; 1907, c. 959, b. 2; 1919, 
176, 8. 2. 

Bnlldlng It Loan g 42. In ease of insolvency of a buildiag and loan as 
eiatiou, borrowing memberB should he charged with the amount actually 
received by tbein, with 6 per cent, interest, and credited with the amount 
paid by them, whether paid as finee, penaltioa or weekly dues.^-Straur — 
CaralinA luteratate Building Sc Loan Abb'q, 117 N. C. 308, 23 S. E. 450. 

BaJMloc ft Loan gSi. A holder of stock in a building and loan asai 
tioD unat share is the loBsea as well as the profitB of the concern, and is 
liable for duly authorized assesBmentB to cover the lossea of the corpora- 
tion. — New Bern B. & L, Aes'n v. Blaloch, 160 N, C. 490, 76 S. E. 533. 

620. Married women and minors as shareholders. Married 
women and minors of the age of twelve years and |a|i^t^^(B^ie 



250 North Carolina Corporation Code 

authorized and empowered to become shareholders in and boy, 
sell, hold, pay dues on, withdraw, transfer, and otherwise deal 
in the shares in any such association in the same manner and with 
the same powers, rights, and liabilities, force and effect as though 
such minors or femes covert were of full age or unmarried. 

C. S., B. Stei; Rev., a. 3885; 1903, c. 728; 1B05, c. 435, 8. 1. 

BoBband ft Wffo § 98. A stockliolder in a. building association, who owes 
it for balance of money borrowed, though a married woman must, on the 
association becoming insolvent, contribute to tbe losses. — Meares v. Duncan, 
123 N. C. 203, 31 S. E. 476. 

ART. 3. LOANS. 

B21. Manner of making loans; security required. At such 
times as the by-laws shall designate, not less frequently than once 
a month, the board of directors shall hold meetings at which the 
funds in the treasury applicable for loans may be loaned. No 
loans shall be made by such association to any one not a share- 
holder thereof, nor to any shareholder for an amount greater than 
the par value of the shares held by such shareholder. Borrowers 
shall be required to give real estate security, either by way of 
mortgage or deed in trust unincumbered, except by the prior liens 
held by such association, accompanied by a transfer and pledge to 
the association of the shares by reason of which he became en- 
tilled to obtain such loan, as collateral security for the repayment 
of the loan: Provided, that the shares of any such association 
may be received as security for a loan on such shares of an amount 
not to exceed ninety per centum of the amount paid in as dues on 
such shares: Provided further, that liberty loan bonds issued by 
the United States government may be received as security to an 
amount not exceeding ninety per cent of the face value of such 
bonds, and not exceeding the par value of the shares of stock held 
by the borrower ; and any loans heretofore made by any such as- 
sociation upon the security of such liberty loan bonds, within 
said limits, are in all respects validated. 

C. 8., 8. 5162; Rev., 8. 3890; 1905, c. 435, s. 6; 1907, c. 959, s. 4; 1919, e. 249. 

522. Kepayment at any time. Any member of such association 
who shall borrow from it shttU have the right at any time prior 
to the maturing of the shares pledged as collateral for .such loan 
to pay off and discharge his loan by paying the amount received 
by him, including the cost and expenses of making the loan, if 
the same has been deducted therefrom, with interest at the rate 
of six per cent per annum on the whole sum received by him to 
the date of settlement and all fines and dues then remaining 



NoBTH Carolina Corporation Code 261 

unpaid. Upon Buch aettlement he shall be credited with only the 
withdrawal value of his shares as fixed by the charter or by-laws, 
or by the directors of such association. In case of default by a 
shareholder who has borrowed from the association and a fore- 
closure of his mortgage or deed of trust, the amount of this in- 
debtedness to such association shall be ascertained in the manner 
provided by this subchapter. 

tu AUD., 117-308, ILS-SSej B. and L. A. v. 



Building ft Zioui §34. A atockholder of a building and Iobu » 
who is also a. borrower from it on tlie security of his stock and n deed of 
trust binding realty for payment of principal, interest, and assessments, is 
Bot entitled to have the deed of trust cancelled until lie has paid his pro 
rata part of the losses of the association. — New Bern B. tc Ir. Abs'u v. Bla- 
lock, 160 N, C. 490, 76 S, E. 532. 

g 33. Building and loan asBOciatiouB are governed by 

Bnildlng ft Iioan gSS. A Hue for nonpajtuent of money is iuterest; and, 
where a building and loan association, by means of fines, exacts mors 
than the legal rate, the tines arc usurious interest. — Smith v. Old Domin- 
ion Building & Loan Ass'n, 119 N. C. 2ST, 26 B. E. 40. 



Bnildlng ft IiOan g33. Where a member of a building a 
rows from it, any charges made against him in excess of the lawful rate of 
interest, whether called "fines," "charges," "dues," or "interest," are 
oinHone.— BoUowell v. Southern Building & Loan Ass'n, 120 X. C. 286, 26 
8. E. 781. 

Bnildlng ft Loan §42. In case of insolvency of a building and loan asBo- 
ciatioQ, borrowing members should be charged with the amount actually 
received by them, with 6 per tent, interest, and credited with the amount 
paid by them, whether paid as fines, penalties, or weekly dues. — Strauss v. 
Carolina Interstate Building ft Loan Ass'n, 117 N. C. ^08, 23 8. E. 450. 

523. Power to borrow mon^. Any such association may in 
its constitution authorize the board of directors from time to time 
to borrow money on the note of the association. The board of 
directors may, from time to time, by resolution adopted by a 
vote of at least two-thirds of all the members of the board and 
duly recorded on the minutes, borrow money for the association 
on such terms and conditions as they may deem proper ; but the 
total amount of money so borrowed shall at no time exceed thirty 
per centum of the amount then actually paid into the association 
as subscription or dues on installment shares, and the same shall 
be used for no other purpose than to make loans to members in 
regular course of business or to pay maturing series of stock. 

C. 8., a. 5184; Bev., a. 38B2; 1905, c. 435, s. 10; 1909, c. 898; 1911, c. SI; 



252 North Carolina Corporation Code 

art. 4. under control of insurance 
commissioner. 

624. Power of insurance conumssioner. The insurance com- 
missioner of the state is hereby empowered and directed to per- 
form all the duties and exercise all the powers as to building and 
loan associations now imposed or conferred upon any other officer 
of the state by the laws thereof, unless herein otherwise provided. 

C. S., 8. 6185; Kev., b. 3893; 1905, e. 435, 8. 24. 

625. Annual license fees. All domestic building and Loan as- 
sociations shall pay an annual license fee of twenty-five dollars 
and may be licensed upon filing with the insurance commissioner 
an application in sueh form as be may prescribe. Such license 
fee shall be used to defray the expenses incurred by the insurance 
commissioner in supervising building and loan associations. 

C. S., B. 5186; 1919, e. 179, b. 1. 

526. Statement filed by association. Every association doing 
business under this subchapter shall file in the ofBce of the in- 
surance commissioner, on or before the first day of February in 
each year, in such form as he shall prescribe, a statement of the 
business standing and financial condition of the applicant on the 
preceding thirty-first clay of December, signed and sworn to by 
the principal, or chief managing agent, attorney, or officer thereof, 
before the insurance commissioner, or before a commissioner of 
affidavits for North Carolina, or before some notary public. 

C. S., B. 5187; Rev., a. 3894; 1905, c. 435, i. 11; 1907, c. 959, s. 5. 

527. Statement examined, approved, and published; fees. It 
shall be the duty of the insurance commissioner to receive and 
thoroughly examine each annual statement required by this sub- 
chapter, and if made in compliance with the requirements thereof, 
to publish an abstract of the same in one of the newspapers of 
the state, to be selected by the general agent or attorney making 
sueh statement, and at the expense of his principal. The insurance 
commissioner shall be entitled to a fee of five dollars, to be paid 
by the association filing such statement. 

C. a, B. 5188; Rev., a 3895; 1905, c. 435, a. 13. 

628. License revoked. If the insurance commissioner shall be- 
come satisfied at any time that any statements made by any as- 
sociation licensed under this subchapter are untrue, or in case 
a general agent shall fail or refuse to obey the provisions of this 
subchapter, or if upon examination the insurance commissioner 
is of opinion that such association or company is insolvent, or 



North Cakolina Corporation Code 253 

has exceeded its powers, or has failed to comply with any pro- 
visions of law, or its mode of business is not feasible for the pur- 
poses of carrying oat Buccessfully its plan,' or that its condition 
is such as to render its further proceedings hazardous to the stock- 
holders, he shall thereupon have power to revoke and cancel such 
license. 

C. 8., 8. 5189; Rev., b. 38»6; 1605, c. 435, b. 13; 1907, c. 959, b. <!. 

029. Examinations made; expense paid. If at any time the in- 
surance commissioner has good reason to think that the standing 
and responsibility of any building and loan association or com- 
pany doing business in this state, or its mode of business, is of a 
doubtful character, or in his discretion whenever he deems it 
prudent to do so, it shall be his duty to examine and investigate 
everything relating to the business of such company, and to that 
end he is hereby authorized, if he deem it advisable, to appoint a 
suitable and competent person to make such investigation, who 
shall file with the insurance commissioner a full report of his 
finding in such case. The expenses and cost of such examination 
shall be defrayed by the company or association subjected to 
investigation, and each company or association doing business in 
this state shall stipulate in writing, to be filed with the insurance 
commissioner, that it will pay all reasonable cost and expenses of 
such examination when it shall become necessary. 

C. S., a. 5190; Bev., a. 3887; 1905. c. 435, si. 14, 15; 1919, c. 179, 8. 4. 

630. Failing to exhibit books or making false statement a mis- 
demeanor. If any person having in his possession or control any 
books, accounts, or papers of any building and loan association 
licensed by law, shall refuse to exhibit the same to the insurance 
commissioner, or his agents on demand, or shall knowingly or 
wilfully make any false statement in regard to the same, he shall 
be guilty of a misdemeanor, and fined and imprisoned, at the dis- 
cretion of the court. 

C. 8., B. 5191; Bev., a. 3329; 1893, e. 434; 1899, c. 164. 

631. Agent mnst obtain certificate. It shall be unlawful for 
any person to solicit business or act as ageut for any building 
and loan association or company without having procured from 
the insurance commissioner a certificate that such association or 
company for which he offers to act is duly licensed by the state 
to do business for the current year in which such person solicits 
business or offers to act as agent. 

C. 8., 8. 5192; Rev., b. 389S; 1S95, c. 444, s. 3; 1S99, c. 154, s. S. aubBee. . 
20; 1907, c. 959, s. 7. i C.,OOglC 



264 NOBTH CABOLINA COBPORATION CODE 

6Ja. Penalties imposed and recovered.. Every general agent or 
attorney of any building and loan company or association who 
shall fail or refuse to perform any duty required of him by this 
snbehapter shall forfeit and pay to the insurance commissioner 
fifty dollars for the state for every such refusal, to be recovered 
before any justice of the peace at the suit of the insurance com- 
missioner. 

C. 8,, B. S193; Rev., b. 3899; iS93, c. 434, b. 2300g; 1S99, t. 154, a. 2, sub- 
see. 20. 

ART. 5. FOREIGN ASSOCIATIONS 

633. Allowed to do business. A building and loan asBociatioa 
of another state may be admitted to transact business in this 
state iu the manner hereinafter provided, and no association not 
so admitted shall transact business in this state. 

C. 8., B. 5194; Hev.. b. 3900; 1905, c. 435, b. 17. 

634. Copy of charter and list of offlcera filed. Application for 
authority to transact business in this state shall be made to the 
insurance commissioner, and on making such application every 
such association shall file with the insurance eommiasioner a duly 
authenticated copy of its charter or certificate of incorporation, 
its constitution and by-laws, and thereafter certified copies of all 
amendments thereto, the names and addresses of its officers and 
directors, the compensation paid each officer, and a report of its 
condition, in such form as may be prescribed by the insurance 
commissioner, which shall be verified by oath of such officers and. 
other persons a.i the commissioner shall designate, and the com- 
missioner shall furnish blank forms for the report required, and 
may call for additional reports at such other times as may seem 
to him expedient, 

C. S., a. 519S; Fev., s. 3902; 1905, e. 435, s. 19. 

636. License gfranted. If it shall appear to the insurance com- 
missioner by the report aforesaid and by an examination of the 
affairs of such association that it has good assets of sufficient value 
to cover all liabilities, and that its methods of doing business are 
safe and not contrary to the laws governing building and loan 
associations of this state, it may be admitted to transact business 
in this state upon a certificate of authority to be issued by the 
insurance commissioner, which shall only be issued when such 
association shall have complied with the further requirements 
of this article. 

C. S., B. 5196; Rev., b, 3903; 1905, c. 435, b. 20. „ .„.| |.„ C^OC^ Ic 



NOBTH CAEOLINA CORPORATION CODE 255 

G36. Securities deposited. The insurance commissioner before 
inning the certificate of authority aforesaid shall require every 
snch association to deposit with the commissioDer such securities 
u he may approve, amounting to at least thirty thousand dollars, 
which securities shall be held by him in trust for the exclusive 
boiefit and security of the creditors and shareholders of such 
association resident in this state, and he shall have authority to 
require it to deposit additional securities and to order a change 
is aoy of the securities so deposited at any time, and no change 
or transfer of the same shall be made or be effectual without his 
consent. Such deposit shall be maintained intact in the full sum 
required at all times, but the association making such deposit, 
so long as it shall continue solvent and comply with all the pro- 
visions of this subchapter applicable to it, may receive the divi- 
dends or interest on the securities deposited, and may from time 
to time, with the assent of the commissioner, withdraw any of 
sDch securities on depositing with the commissioner other like 
securities the par value of which shall be equal to such as may 
be withdrawn. 

C. 8., s. 5197; Eev., b. 3904; 1905, e. 435, s. 2]. 

637. Atmual certificate; service of process. Buch certificate of 
anthority shall be for the current year only, and shall not be 
issued until such association shall, by a duly executed instrument 
filed with the insurance eommisioner of the state, constitute the 
insurance commissioner and his successors in office its true and 
lawful attorney, upon whom all original process in any action or 
legal proceedings against it may be served, and therein shall 
agree that any original process against it which may be served 
upon the commissioner shall be of the same force and vaKdity as 
if served on the association, and that the authority thereof shall 
continue in force irrevocable so long as any liability of the as- 
sociation remains outstanding in this state. The service of such 
process shall be made by leaving a copy of the same in the office 
of the insurance commissioner, with a fee of two dollars, to he 
taxed in the plaintiff's costs. When any original process is thus 
served, the commissioner, by letter directed to the secretary, shall 
within two days after such service forward to the secretary a 
topy of the process served upon him, and such service shall be 
deemed sufficient service upon the association. The commissioner 
shall keep a record of all such process, showing the day and hour 
of service. 
C. 8., s. 61»8i Fev., a. 3906; 1905, c. *35, i. 23. r"" ,\, ^,^ L- 



256 NoETH Carolina Corpobation Code 

638. A^Dt must have certificate of license; fees. It shall be 
unlawful for any person to solicit buslaess or act 88 agent for any 
foreign building and loan association or company doing business 
in this state without having first procured from the insurance 
eommisaioner a certificate that such association or company for 
which he offers to act is duly licensed by the state to do bounesa 
for the current year in which such person solicits business or 
offers to act as agent. The insurance commissioner shall be en- 
titled to a fee of one dollar for issuing each such certificate, to 
be paid by the company for which the same is issued. Any person 
violating the provisions of this section shall be guilty of a mis- 
demeanor. 

C. S., 8. 5199; Rev., ss. 3337, 3901; 1895, e. 444, b. 3; 1905, c. 436, b. 18. 

639. Fees tatd expenses. Every such association shall pay for 
filing a certified copy of its charter or certificate of incorporation 
twenty dollars ; for filing original annual reports, twenty dollars ; 
for certificate of authority, annually, two hundred and fifty 
dollars; for certificate for each agency, five dollars; and shall 
defray all expenses incurred in making any examination of its 
affairs as herein provided for; and the insurance commissioner 
may maintain an action in the name of the state against such 
association for the recovery of such expenses in any court of com- 
petent jurisdiction. 

C. S., B. 5200; Rev., b. 3B05; 1905, c. 435,.a. 22. 

640. Stock listed for tEoation. All foreign building and loan 
associations doing business in this state shall list for taxation with 
the state auditor, through its agent, its stock held by citizens of 
this state in the county, city, or town where the owners of Buch 
stock reside. In listing such stock for taxation the withdrawal 
value as fixed by the by-laws of each company shall be furnished 
the list taker, and the stock shall be valued for taxation as other 
money investments of citizens of this state. All such taxes shall 
be paid by the association listing the stock. 

C. S., 8. 5201; Bev., a. 3907; 1B05, c. 435, s. 25. 

641. Failure to list stock for taxation a misdemeanor. If any 
foreign building and loan association or officer of such association 
doing business in this state, or any local oflicer or person shall 
collect dues, assessments, premiums, fines, or interest from any 
citizen of this state for any such association which has failed 
or refused to list for taxation the stock held by citizens o| this 



North Casolina Corporation Code 257 

state, he shall be guilty of a misdemeanor and subject to fine or 
imprisonment, or both, in the discretion of the court. ■ 
C. S., 8. 5202; Bev., s. 3328; 1905, e. 43S, s. 25. 

6^. All contracts deemed made •in this state. Any contract 

made by any foreign association with any citizen of this state 

shall be deemed and considered a North Carolina contract, and 

' shall be so construed by all the courts of this state according to 

the laws thereof. 

C. 8., B. 5203; 1905, e. 439, 8. 26. 

BdIUIiik tt LoMi §27. Where a loan is made through a loi-at branch of a 
building and loan aBsociatioo of another state, the by-laivs of whii'b pro- 
vide that the treasurer of the branch shall receive 2 per rent, on collectionfl, 
and that he shall give bond for prompt remittance of collectiona to the 
parent office, the contract, though reciting that it is solvable in the other 
state, will be held to have been intended to be solved by payment to the 
loeal treasurer, and therefore governed by the laws of the state of such 
branch. — Meroney v. Atlanta National Building ft Loan Ass'n, 116 N. C. 
883, 21 S. E. 924. 

BnlUUng ft Iioan §36. A contract by which the stock tnkcn out by a 
borrower, aod assigned to the association, when the mortgage is executed, 
is forfeited to the association on default, without allowance of credit on 
the mortgage for the payments made on the stock, is unconscionable, and, 
tliough upheld by the laws of the association's own state, would not be 
enforceable in North Carolina. — Rowland v. Old Dominion Building & Loan 
Ass'n, 116 N. C. 877, 22 S. E. 8. 

SUBCHAPTER II. LAN0 AND LOAN ASSOCIATIONS. 

ART. 6. ORGANIZATION AND POWERS. 

643. Application of tena. The term "land and loan associa- 
tions" shall apply to and include all corporations, companies, 
societies or associations organized for the purpose of making 
loans to its members only, and of enabling its members to acquire 
real estate, make improvements thereon, and remove incum- 
brances therefrom by the payment of money in periodical install- 
ments or principal sums, and for the accumulation of a fund to 
be returned to members who do not obtain advances for such 
purposes, where the principles of building and loan associations 
and their work are adapted to the use of the farmers and the 
rural population. 

It shall be unlawful for any corporation, company, society, or 
association doing business in this state not so conducted to use in 
its corporate name the term "land and loan association," or in 
any manner or device to hold themselves out to the public as a 
land and loan association. 

C. 8., a. 5204; 1915, c. 172, s. 1. /— r 

DiyilzcdbvCjOO^IC 



258 NoETH Carolina Corpobation Code 

544. InooTporation and powers. Land and loan associations 
shall be incorporated, supervised, and be subject to such regula- 
tions and have such privileges as are prescribed for building and 
loan associations under the laws of this state as they now are or 
may be hereafter enacted, except as prescribed in this article. 

C. S., s. 5205; 1B15, c. 173, a. 2. 

646. ZrfKUU. The boards of directors of land and loan associa- 
tions may contract for loans to the amount of seventy-five per 
cent of the securities used by them as collateral, where the loans 
are on long time (three or more years), and for at least one per 
cent less than is charged by such associations on their loans to 
shareholders ; and they may make short loans to their shareholders 
on their shares and personal indorsement or personal property. 

C. S., B. 5306; 1915, c. 172, b. 3. 

646. Reserve associations. Associations to be known as "re- 
serve land and loan associations" may be chartered and licensed 
as provided in this article, when organii^ed and the stock therein 
held by local land and loan associations, and shall have such 
powers, rights, and privileges as are accorded to other domestic 
associations, and may conform to such laws, rules, and regulations 
as may be prescribed by the laws of the United States, or of thia 
state, to enable them to receive moneys, bonds, or securities to be 
used in loans and to secure the same. Such reserve associationa 
shall be under the supervision of the insurance commissioner an 
are building and loan associations. 

C. S., s, 5207; 1915, c. 172, b. 4. 

SUBCKAPTER III. CREDIT UNIONS. 

ART. 7. SUPERINTENDENT OF CO-OPERATIVE ASSOCIA- 
TIONS AND CREDIT UNIONS. 

647. Office created. There shall be established as a part of 
the division of markets and rural co-operation, established under 
the "joint committee for agricultural work," provided for in the 
chapter on Agriculture, article 1, part 'i, a superintendent of co- 
operative associations and credit unions, and such assistanta 
as may be necessary, at salaries to be fixed by the "Joint Com- 
mittee for Agricultural Work" of the state board of agriculture 
and the North Carolina State College of Agriculture and Engi- 
neering. 

C.S.,.. 5208, 1915,0.1.5,..!. „„„.,,CoOglc 



North Casouna Cobp(»ution Code 269 

Bffi. Duties of the officer. The duties of the auperiutendent 
of co-operative associations and credit uttiorts shall be as follows : 

1. To organize and conduct, in the division of markets and 
rural co-operation, a bureau of information in regard to co-opera- 
tive associations and mral credits. 

2. Upon the application of three persons residing in the state 
of North Carolina, to furnish, without cost, such printed infor- 
mation and blank forms as, in his discretion, may be necessary 
for the formation and establishment of any co-operative associa- 
tion or any local credit union in the state. 

3. To maintain an educational campaign in the state looking 
to the promotion and organization of co-operative associations 
and credit unions; and upon the written request of twelve bona 
fide residents of any particular locality in this state expressing a 
desire to form a co-operative association or local credit union at 
such locality, the superintendent or one of his assistants shall 
proceed as promptly as convenient to such locality and advise 
and assist such organizers to establish the institution in question. 

4. To examine at least once a year, and oftener if such examina- 
tion be deemed necessary by the superintendent or his assistant, 
the credit unions and co-operative associations formed under this 
subchapter. A report of such examination shall lie filed with the 
division of markets and rural co-operation, a copy mailed to the 
credit union or co-operative association at its proper address, 
and a copy sent to the clerk of the superior court of the county 
in which the principal ofBce of the credit union or co-operative 
association is located, and such report shall be kept on file, by the 
clerk of the superior court for public inspection. 

C. S., e. 5200; 1915, c. 115, b. 1. 

ART. 8. INCORPORATION OF CREDIT UNIONS, 

649. Application filed. Seven or more persons employed or 
residing in the state may become a credit union by making, sign- 
ing, and acknowledging a certificate which shall contain: 

1, The name of the proposed credit union, which shall include 
the words "credit union." 

3. A statement that incorporation is desired under this article. 

3, The conditions, whether of residence, of occupation, or other- 
wise, which shall qualify persons for membership. 

4, The par value of the shares, which shall not exceed twenty- 
five dollars. 

5, The city, village, or town in which its principal business i 

;^^lc 



260 North Cabolina Coepobation Code 

office is to be located. If it is to be located in an incorporated 
city, the street address of the city shall be given. If the condition 
of its membership is employment by a certain individual, copart- 
nership, or corporation, a statement that its office shall be with 
such individual, copartnership, or corporation may be substituted 
for the street address. 

6. The number of its directors, not less than five, all of whom 
must be members of and shareholders in the corporation. 

7. The names and postoffice addresses of directors for the first 
year. 

8. The names and postoffice addresses of the subscribers to 
the certificate, and a statement of the number of shares of stock 
which each agrees to take in the corporation. 

C. S., B. fS210; 1915, c. 115, s. 2. 

660. By-laws adopted. At the time of filing the certificate the 
incorporators shall adopt by-laws which shall provide: 

1. The name of corporation. 

2. The purposes for which it is formed. 

3. Qualifications for membership. 

4. The date of the annual meeting; the manner in which mem- 
bers shall be notified of meetings; the manner of conducting the 
meetings; the number o£ members which constitute a quorum at 
the meetings, and the regulations as to voting. 

5. The number of members of the board of directors, their 
powers and duties, and the compensation and duties of officers 
elected by the board of directors. 

6. The number of members of the credit committee, their powers 
and duties. 

7. The number of members of the supervisory committee, their 
powers and duties. 

8. The par value of shares of capital stock. 

9. The conditions upon which shares may be issued, paid in, 
transferred, and withdrawn. 

10. The fines, if any, which shall be charged for failure to meet 
obligations to the corporation punctually. 

11. The conditions upon which deposits may be received and 
withdrawn. Whether the proposed corporation shall, in addition, 
have the power to borrow funds. 

12. The manner in which the funds of the corporation shall be 
invested. 

13. The conditions upon which loans may be mad$ and repaid. 

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North Cabolina Coepobation Code 261 

14. The m&zimutn rate of interest that may be charged upon 
loans, not to exceed, however, the legal rate. 

15. The method of receipting for money paid on account of 
shares, deposits, or loans. 

16. The manner in which the reserve fund shall be accumulated. 

17. The manner in which dividends shall be determined and 
paid to members. 

18. The manner in which a voluntary dissolution of the cor- 
poration shall be effected. 

C. a, 8. S211; 1915, c. 115, s. 2. 

SSI. Oertiflcate of incorporation. The by-laws acknowledged 
to have been adopted by all the incorporators, together with the 
certificate of incorporation, shall be filed in the office of the su- 
perintendent of co-operative associations and credit unions, who 
shall approve the certificate of incorporation if he is satisfied 
that it is in conformity with thi^ subchapter, and shall approve 
the by-laws if he is satisfied as to the character of the incorpora- 
tors and that the by-laws are reasonable and will tend to give 
assurance that the affairs of the prospective credit union will be 
administered in accordance with this subchapter. Thereupon, 
the superintendent of co-operative associations and credit unions 
shall issue to the corporation a certificate of approval, annexed 
to a duplicate of the certificate of incorporation and of the by- 
laws, which certificate of approval, together with the attached 
duplicate certificate of incorporation and duplicate by-laws, shall 
be filed in the office of the clerk of the superior court of the 
county in which the office of such credit union is situated, and 
upon such filing the incorporators shall become and be a corpora- 
tion. The county clerk shall charge the same filing fee for filing 
the certificate of approval, certificate of incorporation and by- 
laws as he is now allowed to charge for filing a certificate of in- 
corporation of a corporation organized under the business cor- 
porations law of the state. 

C. S., B. 5212; 1&15, c. 115, b. 2. 

662. Amendment of by-law8. The by-laws adopted by the in- 
corporators and approved by the superintendent of co-operative 
associations and credit unions shall be the by-laws of the corpo- 
ration, and no amendment to the by-laws shall become operative 
until such amendment shall have been approved by the superin- 
tendent of co-operative associations and credit unions, and a copy 
thereof certified by him, with a certificate of bis approval, shall 
be filed in the office of the clerk of the superior court of the county 
where the office of the credit union is located. Such approval majQ \q 



262 North Carolina Cobporation Code 

be given or withheld by the Buperintendent of co-operative asso- 
ciations and credit unions at his discretion. The county elerk 
shall receive the same fee for filing aa provided in the preceding 
section. 

C. S., s. 5213; 1915, e. 115, s. 3. 

496. Bills in a set constitute one bill Where a bill is drawn in 
partnership, association, ctr corporation except corporations form- 
ed under the provisions of this subchapter, of any name or title 
which contains the two words "credit" and "union," shall be a 
misdemeanor. 

C. S., 8. 5314: 1915, <■- 115, 8. i. 

S64. Change of place of business. A credit union may change 
its place of business on tho written approval of the superintend- 
ent of co-operative associations and credit unions, which written 
approval shall be filed in the office of the superintendent of co-op- 
erative associations and credit unions and a duplicate of the ap- 
proval in the office of the clerk of the superior court of the county 
where its office was located, and a second duplicate in the office 
of the clerk of the superior court of the county in which the new 
office is to he located. Such approval of the superintendent may 
be given or withheld at his discretion 

C. S., s. 5215; 1915, c. 116, s. 25. 

AUT. 9. POWERS OF CREDIT UNIONS. 

BBS. Oeneral nature of business. A credit union may receive 
the savings of its members in payment for shares or on deposit ; 
may loan to its members at reasonable rates of interest not ex- 
ceeding the legal rate, or may invest as hereinafter provided the 
funds so accumulated, and may undertake such other activities 
relating to the purpose of the corporation as its by-laws may 
authorize. 

G. S., B. 5216; 1915, c. 115, a. 5. 

5B6. Beoflive deposits. A credit union may receive on deposit 
the savings of its members and also nonmembers in such amounts 
and upon such terms as the board of directors may determine and 
the by-laws shall provide. 

C. B., a. 5217; 1915, c. 119, 8. 16. 

5B7. Borrowing money. If the by-laws ao provide, a credit 
union ehali have power to borrow money from any source in addi- 
tion to receiving deposits from its own members, but the agsre- 



North Cabolina Cokporation Code 263 

gate amount of such indebtedness in the case of credit imiona 
which have over five thousand dollars in capital, surplus, and 
reserve funds shall not at any one time exceed more than the sum 
of such funds. 

C. S., 8. 5218; 1915, c. 115, a. 17; 1917, c. 232, s. 1. 

658. Investment of fnnds. The capital, deposits, undivided 
profits and reserve fund of the corporation may be invested in 
one of the following ways, and in such way only : 

1. They may be lent to the members of the corporation in ac- 
cordance with the provisions of this subchapter, 

2. They may be deposited to the credit of the corporation in 
savings banks, credit unions, state banks or trust companies, in- 
corporated under the laws of the state, or in national banks lo- 
cated therein. Funds of credit unions deposited in a savings 
bank, state bank, or trust company which may become insolvent, 
shall be preferred in the same way that funds of & "savings and 
loan association" so deposited are preferred under the banking 
law of the state. 

3. After a credit union shall have been in existence for three 
fiscal years so much of the reserve fund hereof as shall equal 
twenty per centum of the total liabilities of the credit union shall 
be deposited on interest in banks incorporated under the laws of 
the state, and in the national banks therein. 

4. Not more than ten per cent of the capital stock and reserve 
fund of a credit union may be invested in the stock of another 
credit imion. 

C. S., a. 521S; 1915, c. 115, s. 18; 1917, c. 232, ss. 2, 3. 

5B9. Zrf>an8. 1. To Members. A credit union may lend to its 
members for such purposes and upon such security and terms as 
the by-laws shall provide and the credit committee shall approve; 
but security must be taken for any loan in excess of fifty dol- 
lars. An indorsed note shall be deemed to be security within the 
meaning of this section. 

2. Inslallment loans. A member who needs funds with which 
to purchase necessary supplies for growing crops may receive a 
loan in fixed monthly installments instead of in one sum. 

3. Loans to members of committee. The supervisory commit- 
tee shall appoint a substitute to act on the credit committee in 
the place of any member in case such member makes application 
to borrow money from the credit union or becomes surety for 
any other member whose application for a loan is under con- 
sideration. 

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264 North Cakolina Corpoeation Code 

4. Loans to persons not members forbidden. All officers and 
members of any committees in any way knowingly permitting or 
participating in making a loan of funds of a credit union to one 
not a member thereof shall be guilty of a misdemeanor. The 
credit union shall have the right to recover the amount of such 
illegal loans from the borrower or from any officers or members 
of committees who knowingly permitted or participated iu the 
making thereof, or from all of them jointly, 

5. Repayment of loans. A borrower may repay the whole or 
any part of his loan on any day on which the office of the cor- 
poration is open for the transaction of business.. 

C. S., 8. 5220; 1915, e. 115, b. 19; 1917, c. 232, a. 4. 

560. Rate of interest; penalty. No corporation organized pur- 
suant to this subchapter shall directly or indirectly charge or re- 
ceive any interest, discount, or consideration, other than the en- 
trance fee, greater than the legal rate. 

Any corporation, any person, the several officers of any corpo- 
ration, and the members of committees who shall violate the fore- 
going prohibition shall be guilty of a misdemeanor. The corpo- 
ration shall also be subject to procedure by the superintendent of 
co-operative associations and credit unions as prescribed herein 
in article twelve. 

C. S., a. 5221; 1915, c. 115, b. 20. 

561. Reserve fund. All entrance fees, transfer fees, and fines, 
shall after the payment of organization expenses, be known as 
reserve income, and shall be added to the reserve fund of the cor- 
poration. 

At the close of each fiscal year there shall be set apart to the 
reserve fund twenty-five per centum of the net income of the cor- 
poration which has accumulated during the year. But upon the 
recommendation of the board of directors the members at an an- 
nual meeting may increase, and whenever such funds equal the 
amount of the capital may decrease, the proportion of profits 
which is required by this section to be set apart to the reserve 
fund. Nor shall the reserve fund in any case exceed the capital 
of the corporation plus fifty per centum of its other liabilities. 

The reserve fund shall belong to the corporation and shall be 
held to meet contingencies, and shall not be distributed to the 
members except upon the dissolution of the corporation. 

C. S., 8, 5222; 1915, c. 115, b. 21. 

662. Dividends. At the close of the fiscal year a credit union 



sdbyCoO^Ic 



North Cakolina Corporation Code 265 

mas declare a dividend not to exceed six per cent per annum 
from the income during the year and which remains after the de- 
duction of expenses, losses, interest on deposits, and the amount 
required to be set apart to the reserve fund. Dividends shall be 
paid on all fully paid shares outstanding at the close of the fiscal 
jear, but shares which become fully paid during the year shall be 
entitled to a proportional part of such dividend calculated from 
■the first day of the mouth following such payment in full. 
C. S., a. 5223; 1915, c. 115, b. 22. 

563. Volnntary dissolution. At any meeting specially called 
to consider the subject, four-fifths of the entire membership of the 
corporation may vote to dissolve the corporation and upon sueh 
vole shall signify their consent to such dissolution in writing. 
Such corporation shall then file in the office of the superintendent 
of co-operative associations and credit unions such consent, at- 
tested by its secretary or treasurer and its president or vice- 
president, with a statement of the names and residences of the 
existing board of directors of the corporation and the names and 
residences of its officers duly verified. The superintendent of co- 
operative associations and credit unions, upon receipt of satis- 
factory proof of the solvency of the corporation, shall issue to 
such corporation, in duplicate, a certificate to the effect that such 
consent and statement have been filed and that it appears there- 
from that such corporation has complied with this section. Such 
duplicate certificate shall be filed by the corporation in the office 
of the clerk of the superior court of the county in which the cor- 
poration has its place of business, and thereupon sueh corporation 
shall he dissolved and shall cease to carry on business except for 
the purpose of adjusting and winding up its affairs. The corpo- 
ration, by its board of directors, shall then proceed to adjust and 
wind up its business and affairs, with power to carry out its con- 
tracts, collect its accounts receivable, and to liquidate its assets 
and apply the same in discharge of debts and obligations of such 
corporation, and after paying and adequately providing for the 
payment of sueh debts and obligations each share, according to 
the amount paid thereon, shall be entitled to its proportion of 'the 
balance of the assets. The corporation shall continue in existence 
for the purpose of paying, satisfying, and discharging any exist- 
ing debts or obligations, collecting and distributing its assets, 
and doing all other acts required in order to adjust and wind up 
its business and affairs, and may sue and be sued for the purpofffi^^,],. 



266 NoKTH Carolina Corpobation Codb 

of ecforciug such debts and obligations luitil its business and 
affairs are fully adjusted and wound up. 

C. S., B. 5224; 1915, c. 115, a. 24. 

664. Savings iiutitiition; restriction of taxation. The corpora- 
tion shall be deemed an institution for savings, and together with 
all accumulations therein shall not be taxable under any law 
which shall exempt savings banks or institutions for savings from 
taxation ; noi' shall any law passed taxing corporations in any 
form, or the shares thereof, or the accumulations therein, be 
deemed to include corporations doing business in pursuance of 
the provisions of this subchapter, unless they are specifically 
named in such law. The shares of credit unions, being hereby re- 
garded as a system for saving, shall not be subject to any stock- 
transfei' tax either when issued by the corporation or transferred 
from one member to another. 

C. 8., s. 522G; 1B15, e. IIS, a. 2«. 

ART. 10. SHAEES IN THE CORPORATION. 

666. Ownership and transfer of shares. The capital of a credit 
union shall consist of the payments that have been made to it by 
the several members thereof on the shares. Shares may be sub- 
scribed for and paid in such manner as the by-laws shall prescribe. 
The credit union shall have a lien on the shares of any member 
and upon any dividends payable thereon for and to the extent of 
any loan made to him and of any dues or fines payable by him. 
The credit union may, upon the resignation or expulsion of a 
member, cancel the shares of such member and apply the with- . 
drawal value of such shares towards the liquidation of the mem- 
ber's indebtedness. i 

A credit union may, if the by-laws so provide, charge an en- 
trance fee for each share subscribed, to be paid by the share- 
holder upon his election to membership. 

Fully paid shares of a credit union may be transferred to any 
person eligible for membership, upon such terms as the by-laws 
may provide, and the payment of a transfer fee shall not exceed 
twenty-five cents per share. 

C . 8., 8. 5326; 1915, c. 115, 8. 13. 

566. Shares and deposits for minors and in trust. Shares may 
be issued and deposits received in the name of a minor, and such 
shares and deposits may, in the discretion of the directors, be 
withdrawn by such minor or his parent or guardian, and in either 
case payments made on such withdrawals shall _^be valid. If 

DiyilzcdbvCoO^^IC 



N<HITH CABOLINA COBPOBATION CODE 267 

shares are held or deposits made in trost, the name and residence 
of the beneficiary shall be disclosed and the account shall be kept 
in the name of such holder as trustee for such person. Such 
shares or deposits may, upon the death of the tmstee, be with- 
drawn by the person for whom the shares were held or for-whom 
sneh deposits were made, or by his legal representatives. 
C. S., i. 6227; 1915, c. 115, s. 14. 

567. Fines and penalties. For failure by any member of a 
credit union to meet his payments on shares when due, such fines 
and other penalties may be imposed upon the delinquent member 
as the by-laws provide. Such fines shall not exceed two per 
centum per month or a fraction thereof on amounts due, except 
that a minimum fine of five cents may be imposed. 

C. a, a. 522S; 1915, c. 115, b. 16. 

(68. Uabili^ of shareholders. A shareholder of any such cor- 
poration, unless the by-laws so provide, shall not be individually 
liable for the payment of its debts for an amount in excess of the 
par value of the shares which he owns or for which he has sub- 
scribed. 

C. S., 8. C2Z9; 191S, c. 116, s. 26. 

ART. 11. MEMBERS AND OFFICERS. 

669. Who may become members. The membership of the cor- 
poration shall consist of those persons who have been duly elected 
to membership and who have subscribed for one or more shares 
and have paid for the same in whole or in part, together with the 
entrance fee as provided in the by-laws, and have complied with 
such other requirements as the by-laws may contain. No credit 
union shall ever pay any comjnission or oEEer compensation for 
the securing of members or on the sale of shares. 

C. 8., a. 5230; 1915, e. 115, t. 6. 

670. ExptdBion and withdrawal of members. The board of di- 
rectors may expel from the corporation any member who has not 
carried out his engagement with the corporation, or has been con- 
victed of a criminal offense, or neglects or refuses to comply 
with the provisions of this subchapter or of the by-laws, or who 
habitually neglects to pay his debts, or shall become insolvent or 
bankrupt. The members at a regularly called meeting may expel 
from the corporation any member who has become intemperate 
or in any way financially irresponsible; no member shall be ex- 
pelled until he has been informed in writing of the charges ag^ainst 

DiyilzcdbvCoO^IC 



268 NoBTH Casouma Corporation Code 

him and an opportunity has been given him', after reaaonabte 
notice, to be heard thereon. 

A member may withdraw from a credit union by filing a writ- 
ten notice of his intention to withdraw. 

The amounts paid in on shares or deposits by an expelled or 
withdrawing member, with any dividends credited to his shares 
and any interest accrued on his deposits to the date of expul- 
sion or withdrawal, shall be paid to such member, but in the order 
of expulsion or withdrawal and only as funds therefor become 
available, after deducting any amounts due to the corporation 
by sucb member. The member shall have no other or further 
right in the credit Union or to any of its benefits, but such expul- 
sion or withdrawal shall not operate to relieve the member from 
any remaining liability to the corporation. 

C. 8., a. 5231; 1915, e. 113, a. 23. 

671. Meetings ; right of voting. The fiscal year of every such 
corporation shall end at the close of business on the thirty-first 
day of December. The annual meeting of the corporation shall 
be held at such time and place as the by-laws prescribe. Special 
meetings may be held by order of the drrectora or of the super- 
visory committee, and shall be held upon request In writing of 
ten per cent of the members. Notice of all meetings of the cor- 
poration shall be given in the manner prescribed in the by-la^vs. 
At all meetings of members or shareholders a member shall have 
one vote and but one vote, irrespective of the number of shares 
that may be held by him, and in case of sickness or other una- 
voidable absence of a member he shall be allowed to vote by 
proxy in writing, but no member present shall vote more than one 
such proxy. At any meeting the members may decide upon any 
question of interest to the corporation, and overrule the board 
of directors, and by a three-fourths vote of those present and rep- 
resented, provided the notice of the meeting shall have specified 
the question to be considered, may vote to amend the by-laws. 

C. 8., s. 5332; 1915, b. 115, s. 8. 

672. Election (rf directors and committees 1. Xvmher elected. 
At the annual meeting the members shall elect a board of directors 
of not less than five members, a credit committee and a supervi- 
sory committee of not less than three members each. However, 
in credit unions whose businei?s office is located in places other 
than incorporated cities, the board of directors as such may also 
be the credit committee. Except as hereinafter specified, no 
member of the board shall be a member of either of such com- 



NcmTH Carolina Corporation Code 269 

mittees, nor shall one person be a member of more than one of 
such committees. A]l members of committees and all directors, 
as well as all officers whom they may elect, shall be sworn, and 
shall hold their several oSices for sach term as may be determined 
by the by-laws. 

2. Oath of office. The oath required of each director, officer, 
ind member of committee shall be the oath of the individual tak- 
ing the same that he wilt, so far as the duty devolves on him, dili- 
gently and honestly administer the affairs of such corporation, and 
will not knowingly violate or willingly permit to be violated any 
of the provisions of law applicable to such corporation, and that 
he is the owner in good faith and in his own right on the books 
of the corporation of at least one share therein. Such oath shall 
be subscribed by the individual making it and certified by the 
officer before whom it is taken, and shall immediately be trans- 
mitted to the superintendent of co-operative associations and 
credit unions and filed and preserved in his office. 

C. 8., B. 5233; 1915, c. 115, i. 9. 

673. Duties of board of directors. 1. Elect e.recufire officers. 
At their first meeting and at each first meeting in the fiscal year, 
(he board of directors shall elect from their number a president, 
vice-president, a secretary, and a treasurer, who shall be the ex- 
ecutive officers of the corporation. The offices of secretary and 
treasurer may, if the by-laws so provide, be held by one person. 

2. Oencval manaficmcnl. The board of direetora shall have 
the general management of the affairs, funds, and records of the 
corporation, shall meet as often as may be necessary, and, unless 
the by-laws shall specifically reserve all or any of these duties to 
the members, it shall be the special duty of the directors; 

1. To act upon all applications for membership and the expul- 
sion of members. 

2. To fix the amount of the surety bond which shall be required 
of each officer having the custody of funds. 

3. To determine from time to time the rate of interest which 
shall be allowed on deposits and charged on loans. 

4. To fix the maximum number of shares which may be held by 
and the maximum amount which may be lent to any one member; 
to declare dividends; and to recommend amendments to the by- 
laws. 

5. To fill vacancies in the board of directors or in the credit 
committees until the election and qualification of successors. 

6. To have charge of the investment of funds of the corapra- 

.,u-..J.y,.C.O()3lC 



270 NoBTH Cabouna Corporation Code 

tion except loans to membera, and to perform such other duties 
as the membera may from time to time authorize. 

3, Cotnpciisalion. N'n member of the board of directors or of 
the credit or supervisory committees shall receive any compensa- 
tion for his services as a member of the board or committees. 
But the officers elected by the board of directors may receive such 
compensation as the members may authorise. 

C. a., 8. 5234; 1915, r. 115, a. 10. 

674. Ihities of credit ciHiunittee. The credit committee shall 
approve every loan or advance made by the corporation to mem- 
bers. Every application for a loan shall be made in writing and 
shall state the purpose for which the loan is desired and the se- 
curity offered. No loan shall be made unless it has received the 
unanimous approval of those members of the committee who were 
present when it was considered, who shall constitute at least a 
majority of the committee, nor if any member of the committee 
. shall disapprove thereof; but the applicant for a loan may appeal 
from the decisions of the credit committee to the board of direct- 
ors. The credit committee shall meet as often as may be required 
after due notice has been given to each member. 

C. 8., a. G2.15; 1915, e. 115, 8. II. 

fi75. Ihities of aupervisoly committee. The Nupei-visory com- 
mittee shall inspect the securities, cash, and accounts of the cor- 
poration and supervise the acts of its board of directors, credit 
committee, and officers. At any time the supervisory committee, 
by a unanimous vote, may suspend the credit committee or any 
member of the board of directors, or any officer elected by the 
board, and by a majority vote may call a meeting of the sharehold- 
ers to consider any violation of this subchapter or of the by-laws, 
or any practice of the corporation which, in the opinion of said 
committee, is unsafe and unauthorized. Within seven days after 
the suspension of the credit committee the supervisory committee 
shall cause notice to be given of a special meeting of the members 
to take such actiim relative to such suspension as may seem nec- 
essary. The supervisory committee shall fill vacancies in their 
own number until the next regular meeting of the members. 

At the close of each fiscal. year the supervisory committee shall 
make a thorougli audit of the receipts, disbursements, income, 
assets, and liabilities of the corporation for the fiscal year, and 
shall make a full report thereon to the directors. This report 
shall be read at the annual meeting of the members and ahall be 
filed and preserved with the records of the corporation. 



DiyilzcdbvCoO^IC 



North Cabolina Corporation Code 271 

art 12. ■ supervision and control. 

576. Snbject to sapermtendent of credit anions. Corporations 
vganized under tbe provision of this subchapter shall be subject 
Ij the supervision of the superintendent of co-operative asso- 
ciations and credit unions. 

C. a, t. 5237; 1915, c. 1J5, s. 7. 

677. Annual reports; penalty. Every corporation organized 
under this subchapter shall, in Janiiary of each year, make a 
report for the previous calendar year to the superintendent of 
eo-operative assoeiations and credit unions, giving such informa- 
tion as he shall require, which report shall be verified by the 
oath of the president, treasurer and secretary, as well as by the 
oath of a majority of the members of the supervisory committee 
and it shall make sueh other and further reports under the like 
oath as the superintendent shall demand at any time. 

Any such corporation which neglects to make an annual report 
within the month of January, or any of the other reports re- 
qoired by the superinteadent of co-operative associations and 
credit uoious at the time fixed by the superintendent, shall forfeit 
to the state five dollars for each day such neglect continues. 

C. S., a. 5238; 1915, c. 115, 8. 7. 

B78. Anniuil examinations required. The superintendent of. 
eo-operative associations and credit unions shall cause every sueh 
corporation to be examined once a year and whenever he deems 
it necessary. The examiners appointed by him shall be given 
free access to all books, papers, securities, and other sources of 
information in respect to the corporation; and for the purpose 
of sueh examination the superintendent' shall have power and 
authority to subpoena and examine personally, or by one of his 
deputies or examiners, witnesses on oath and documents, whether 
such witnesses are members of the corporation or not, and wJiether 
such documents are documents of the corporation or not. 
C. S., a. S239; 1915, c. 115, s. 7. 

579. Bevocation of certificate. If any such corporation shall 
neglect to make its annual report, as provided in this article, for 
more than fifteen days, or shall fail to pay the charges required, 
including the fines for delay in filing reports, the superintendent 
of eo-operative associations and credit unions shall give notice 
to such corporation of his intention to revoke the certificate of 
approval of the corporation for such neglect or failure, and if 
such neglect or failure continues for fifteen days after such no- 

DidilzedbyCoO^IC 



272 NoBTH Carolina Corpoeation Code 

tice, the said superintendent shall, at his discretion, revoke the 
certificate, and he, personally or by one of his deputies, shall take 
possession of the property and business of the corporation and re- 
tain possession until such time as he may permit it to resume 
business, or until its affairs be finally liquidated as provided in 
the banking^ laws of the state. 
C. S., 8. 5240; 1915, e. 115, 8. 7. 

580. Deficits supplied; business discontinned, If it shall appear 
to the superintendent of co-operative associations and credit 
Unions by any examination or report that any sueh corporation is 
insolvent, or that it has violated any of the provisions of this 
subchapter or any other law of the state, he may, by an order 
made over his hand and official seal, after a hearing or an oppor- 
tunity for a hearing given the accused corporation, direct any 
such corpoi'ation to discontinue the illegal methods or practices 
mentioned in the order to make good any deficit. A deficit, in 
the discretion of the superintendent of co-operative associations 
and credit unions, may be made good by an assessment on the 
members in proportion to the shares held by each member. If 
any such corporation shall not comply with sueh order within 
sixty days after the same shall- have been mailed to the last ad- 
dress filed by such corporation in the division of markets and 
rural co-operation, the superintendent shall thereupon take pos- 
session of the property and business of such corporation and 
retain' such possession until such time as he may permit it to 
resume business or its affairs be finally liquidated, as provided in 
the banking laws of the state. 

C. S., s, 5241; 1915, c. 115, s. 7. 

SUBCHAPTER IV. CO-OPERATIVE ASSOCIATIONS. 
ART. 13. ORGANIZATION OF ASSOCIATIONS. 

681. Nature of the association. Any number of persons, not 
less than five, may associate themselves as a eo-operative asso- 
ciation, society, company, or exchange, for the purpose of con- 
ducting any agricultural, dairy, mercantile, mining, manufac- 
turing, or mechanical business on the co-operative plan. Por the 
purposes of this subchapter, the words association, company, cor- 
poration, exchange, society, or union shall be construed to mean 
the same. 

C. S., s. 5242; 1915, e. 144, 8. 1. 

S8Z. Use of term restricted. No corporation or association here- 



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North Carolina corporation Code 273 

isafter organized for doing busiaeas for profit in this state Bhall 
bt entitled to use the term "eo-operative" aa part of ita corporate 
or other busineas name or title, unless it has complied with the 
provisions of this subchapter; and any corporation or. association 
violating the provisions of this section may be enjoined from doing 
busioess under such name at the instance of any shareholder of 
any association legally organized under this subchapter. 
C. S., s. 5243; 1915, c. 144, a. 18. 

583. Articles of agreement. The persons desiring to organize 
Buuh association shall sign and acknowledge written articles which 

shall contain the name of the association and the names and resi- 
dences of the persons forming the same. Snch articles shall also 
contain a statement of the purposes of the association and shall 
designate the city, town, or village where ita principal place of 
business shall be located. The articles shall also state the amount 
of authorized capital stock, the number of shares subscribed, and 
the par value of each. No shareholder in any corporation or- 
ganized under this subchapter shall be personally liable for any 
debt of the corporation. 
C. 8., a. S244; 1915, e. 144, s. 2. 

584. Certificate of inc(>rporation. The original articles of in- 
corporation of corporations organized under this subchapter, or a 
true copy thereof, verified aa such by the affidavits of two of the 
signers thereof, shall be filed with the secretary of state. A like 
verified copy of such articles and certificate of the secretary of 
state, showing the date when such articles were filed with and 
accepted by the secretary of state, within thirty days of such 
filing and acceptance, shall be filed with and recorded by the 
clerk of the superior court of the county in which the principal 
place of business of the corporation is to be located, and no cor- 
poration shall, until such articles be left for record, have legal 
existence. The clerk of court shall forthwith transmit to the 
secretary of state a certificate stating the time when such copy 
was recorded. Upon a receipt of such certificate, the secretary 
of state shall issue a certificate of incorporation. 

C. 8., i. 5245; 1915, c. 144, b. 3. 

585. Fees for incorporation. For filing the articles of incor- 
poration of corporations organized under this subchapter, there 
shall be paid the secretary of state ten dollars and his fees al- 
lowed by law, and for the filing of an amendment to such articles, 
five dollars and his fees allowed by law: Provided, that when the 
authorized capital stock of auch corporations shall be less than 

DidilzedbyCoO^IC 



274 North Cabolina Corporation Ck>i>B 

one thousand dollars, such fee for filing either the articles of in- 
corporation or amendments thereto shall be two dollars. For 
recording copy of such articles, the clerk of court shall receive 
a fee of fifty cents, to be paid by the person presenting such 
papers for record. 

C. 8., B. 5246; 1915, e. 144, b. 4. 

686. By-laws adopted. At the time of making the articles of 
incorporation the incorporators shall make by-laws which shall 
provide ; 

1. The name of the corporation. 

2. The purposes for which it is formed. 

3. Qualifications for membership. 

4. The date of the annual meeting; the manner in which mem-* 
bars shall be notified of meetings ; the manner of conducting the 
meetings; the number of members which shall constitute a quo- 
rum at the meetings, and regulations as to voting, 

5. The number of members of the board of directors ; powers 
and duties; the compensation and duties of officers elected by 
the board of directors. 

$, In the case of selling agencies or productive societies, regu- 
lations for grading. 

7. In the case of selling agencies or productive societies, regu- 
lations governing the sale of products by the members througli 
the organization. 

8. The par value of the shares of capital stock. 

9. The conditions upon which shares may be issued, paid in, 
transferred, and withdrawn. 

10. The manner in which the reserve fund shall be accumulated. 

11. The manner in' which the dividends shall be determined 
and paid to members. 

C. S., s. 5247; 1915, c. 144, h. 5. 

687. Gener^ corporation law applied. All co-operative asso- 
ciations shall be maintained in accordance with the general cor- 
poration law, except as otherwise provided for in this subchapter. 

C. S., 8. 5248; 1915, c. 144, s. 17. 

688. Other corporations admitted. All co-operative corpora- 
tions, companies, or associations heretofore organized and doing 
business under prior statutes, or which have attempted to so 
organize and do business, shall have thebenefit of all of the pro- 
visions of this subchapter, and be bound thereby on filing with 
the secretary of state a written declaration, signed and sworn 
to by the president and secretary to the effect that the co-operative 

DidilzedbyCoO^IC 



North Caeolina Corpokation code 275 

eompaiiy or association has by a majority vote of its shareholders 
decided to accept the benefits of and to be bound by the provisions 
of this subchapter. No association organized under this sub- 
chapter shall be required to do or perform anything not specif- 
ically required herein, in order to become a corporation. 
C. 8., H. 5249; 1915, c. 144, b. 16. 

ART. 14. STOCKHOLDERS AND OFFICERS. 

689. Oertiflcates for stock fully paid. Certificates of stock 
shall not be issued to any subscriber until fully paid, but the by- 
laws of the association may allow subscribers to vote as share- 
holders : Provided, part of the stock subscribed for has been paid 
in cash. 

C. 8., s. 5250] 1915, c. 144, s. 11. 

690. Ownership of shares limited. No shareholder in any such 
association «hall own shares of a greater aggregate par value than 
twenty per cent of the paid-in capital stock, except as hereinafter 
provided, or be entitled to more than one vote. A co-operative 
association shall reserve the right of pucchasing the stock of any 
member whose stock is for sale, and may restrict the transfer of 
stock to such persons as are made eligible to membership in the 
by-laws. 

C. 8., 8. 5251; 1915, c. 144, 6. 9. 

691. Shares issued on purchase of business. Whenever an as- 
sociation, ' created under this act, shall purchase the business of 
another association or person, it may pay for the same in whole 
or in part by issuing to the selling association or persons shares 
of its capital stock to an amount which at par value would equal 
the fair market value of the business so purchased, and in such 
ease the transfer to the association of such business at such valua- 
tion shall be equivalent to payment in cash for the shares of stock 
so issued. 

C. S., e. S252; 1915, e. 144, a. 10. 

692. Absent members voting. At any regularly called general 
or special meeting of the shareholders a written vote received by 
mail from any absent shareholder, and signed by him, may be 
read in such meeting, and shall be equivalent to a vote of such 
of the shareholders so signing; Provided, he has been previously 
notified in writing of the exact motion or resolution upon which 
such vote is taken, and a copy of same is forwarded with and 
attached to the vote so mailed by him. In ease of sickness ob 



276 North Cahouna Corporation Code 

other unavoidable absence of a member, he aball be allowed to 
vote by proxy id writing; but qo member shall vote more than 
one sucb proxy. 

C. 8., B. S2S3; 1915, c. 144, s. 12. 

6d3. Directors and other officers. Every such association shall 
be managed by a board of not less than five directors. The di- 
rectors shall be elected by and from the stockholders of the as- 
sociation at such time and for aueh term of office as the by-laws 
may prescribe, and shall hold office for time for which elected 
and until their successors are elected and shall enter upon the 
discharge of such duties as are prescribed in the by-laws; but a 
majority of the stockholders shall have the power at any regular 
or special stockholders' meeting, legally called, to remove any 
director or officer for cause, and fill the vacancy, and thereupon 
the director or officer so removed shall cease to be a director 
or officer of the association. The officers of every such associa- 
tion shall be a president, one or more vice-presidents, a secretary 
and treasurer, who shall be elected annually by the directors, and 
each of the officers must be a director of the association. The 
office of secretary and treasurer may be combined, and when 
so combined the person filling the office shall be secretary-treas- 
urer. 

C. S., B. 5254; 1915, c. 144, a. 6. 

ART. 15. POWERS AND DUTIES. 

594. Nature of business authorized. An association created 
under this subchapter shall have power to conduct any agricul- 
tural, dairy, mercantile, mining, manufactoring, or mechanical 
business, on the co-operative plan. 

C. S., s. 5255; 1915, c. 144, a. 8. 

696. Amendment of articles. The association may amend its 
articles of incorporation by a majority vote of its shareholders 
at any regular shareholders' meeting, or any special shareholders' 
meeting called for that purpose, on ten days notice to the share- 
holders. The power to amend shall include the power to in- 
crease or diminish the amount of capital stock and the number of 
shares: Provided, the amount of the capital stock shall not be 
diminished below the amount of the paid-up capital at the time 
the amendment is adopted. Within thirty days after the adop- 
tion of an amendment to its articles of incorporation, an asso- 
ciation shall cause a copy of such amendment adopted to be re- 



N(mTR Carolina Corporation Code 277 

eorded in the ofBce of the secretary of state and of the clerk 
of court of the county where the principal place of btisiness is 
located. 
C. S., s. 5256; 1015, e. 144, s. 7. 

696. Apportionnient of eamiiigs. The directors, subject to re- 
vision by the association at any general or special meeting, shall 
apportion the earnings by first paying dividends on the paid-up 
capital stock, not exceeding six per cent per annum, then setting 
aside not less than ten per cent, of the net profits for a reserve 
fimd, until an amount has been accumulated in the reserve fund 
equal to thirty per cent of the paid-up capital stock, and not leas 
than two per cent thereof for an educational fund to be used in 
teaching co-operation, and the remainder of the net profits by 
uniform dividend upon the amount of purchases of shareholders 
and upon the wages and salaries of employees, and one-half of 
such uniform dividend to nonshareholders on the amount of their 
purchase, which may be credited to the account of such non- 
shareholders on account of capital stock of the association; but 
in selling agencies such as fruit, truck, peanuts, and cotton 
growers' association, and in productive associations such as 
creameries, canneries, warehouses, factories, and the like, divi- 
dends shall be prorated on raw materials delivered instead of on 
goods purchased. In ease the association is both a selling and 
productive concern, the dividends may be on both raw material 
delivered and on goods purchased by patrons. 

C. a, s. 5357] 1915, c. 144, a. IS. 

597. Time of distribution. The profits or net earnings of such 
associations shall be distributed to those entitled thereto, at such 
times as the by-laws shall prescribe, which shall be as often as 
once in twelve months. 

C. S., B. 5258; 1915, c. 144, g. 14. 

698. Reports to secretary of state. Every association organized 
' under the provisions of this subchapter shall annually, on or be- 
fore the first day of March of each year, make a report to the 
secretary of state; such report shall contain the name of the 
company, its principal place of business in this state, and gen- 
erally a statement as to its business, showing total amount of 
business transacted, amount of capital stock subscribed for and 
paid in, number of shareholders, total expenses of operation, 
amount of indebtedness or liabilities, and its profits and losses. 
A copy of such report shall also be filed with the division of 
markets and rural organization conducted by the "JoiM--Com- r 



278 North Carolina Corporation Cchs: 

mittee for Agricultural Work" of the state board of agriculture 
and the North Carolina State College of Agriculture aod Engi- 
neerinp, as provided in the chapter on Agriculture, 
C, S., a. 5259; 1B15, c. 144, a. 15. 

SUBCHAPTER V. 

CO-OPERATIVE MARKETING OF FARM PRODUCTS. 

B99. Declaratioii of policy. In order to promote, foster, and 
encourage the intelligent and orderly marketing of agricultural 
products through co-operation, and to eliminate speculation 
and waste ; and to make the distribution of agricultural prod- 
acts as direct as can be efficiently done between producer and 
consumer; and to stabilize the marketing problems of agricultural 
products, this act is passed. 

1921, c. 87, a. 1. 

600. Definitions. 

(a) The term "agricultural products" shall include horticul- 
tural, viticultural, forestry, dairy, livestock, poultry, bee and any 
farm products: 

(b) The term "member" shall include actual members of asso- 
ciations without capital stock and holders of common stock in 
associations organized with capital stock; 

(c) The term "association" means any corporation organized 
under this act ; and 

(d) The term "person" shall include individuals, firms, part- 
nerships, corporations, and associations. 

Associations organized hereunder shall be deemed nonprofit, 
inasmuch as they are not organized to make profits for them- 
selves, as such, or for their members, as such, but only for their 
members as producers. 

This act shall be referred to as the "Co-operative Marketing 
Act." 

1921, c. -87, 8. 2. 

601. Wlio may organize. Five (5) or more persons engaged 
in the production of agricultural products may form a nonprofit, 
co-operative association, with or without capital stock, under the 
supervision of this act. 

1921, c. 87, e. 3. 

602. Purposes. An association may be organized to engage 
in any activity in connection with the marketing or selling of the 

r„.„z..J.y,.C.O()g[C 



NoBTH Cabouna Corporation Code 279 ■ 

■{rienltural prodacts of ita members, or with the harveBting, pre- 
stfying, drying, processiug, cauniiig, packing, storing, handling, 
shipping, or utilization thereof, of the manufacturing or market- 
ing of the by-products thereof ; or in connection with the manu- 
facturing, selling, or supplying to its members of machinery, 
equipment, or supplies; or in the financing of the above enu- 
merated activities; or in any one or more of the activities specir 
fled herein. 

1921, c. 87, s. 4. 

603. Preliminary investigation. Every group of persons con- 
templating the organization of an association under this act is 
urged to communicate with the chief of the division of markets, 
who will inform it whatever a survey of the marketing conditions 
affecting the commodities to be handled by the proposed associa- 
tion indicates regarding probable success. 
1921, c. 87, B. 5. 

604. Powers. Each association incorporated under this act 
shall have the following powers: 

(a) To engage in any activity in connection with the market- 
ing, selling, harvesting, preserving, drying, proeeseing, canning, 
packing, storing, handling, or utilization of any agricultural 
products produced or delivered to it by its members; or the 
manufacturing or marketing of the by-products thereof; or in 
coniiection with the purchase, hiring, or use by its members 
of supplies, machinery, or equipment; or in the financing of any 
such activities; or in any one or more of the activities specified 
in this section. No association, however, shall handle the agri- 
cultural products of any nomnember. 

(b) To borrow money and to make advances to members. 

(c) To act as the agent or representative of any member or 
members in any of the above mentioned activities, 

(d) To purchase or otherwise acquire, and to hold, own, and 
exercise all rights or ownership in, and to sell, transfer, or pledge 
shares of the capital stock or bonds of any corporation or associa- 
tion engaged in any related activity or in the handling or market- 
ing of any of the products handled by the association, 

(e) To establish reserves and to invest the funds thereof in 
bonds or such other property as may be provided in the by-laws. 

(f) To buy, hold, and exercise all privileges of ownership, over 
such real or personal property as may be necessary or convenient 
for the conducting and operation of any of the business of the 
association, or incidental thereto. 

DiyilzcdbvCoO^IC 



280 North Cabolina Corporation Code 

(g) To do each and everything necessary, suitable, or proper 
for the aecoraplishment of any one of the purposes or the attain- 
ment of any one or more of the objects herein enumerated; or 
conducive to or expedient for the interest or benefit' of the as- 
sociation ; and to contract accordingly ; and in addition, to exercise 
and possess all powers, rights, and privileges necessary or inci- 
dental to the purposes for which the association is organized or to 
* the activities in which it is engaged ; and in addition, any other 
rights, powers, and privileges granted by the laws of this state to 
ordinary corporations, except such as are inconsistent with the 
express provisions of this act ; and to do any such thing anywhere. 
1921, c. 87, B 6. 

606. MenAwrs. 

(a) Under the terms and conditions prescribed in its by-laws, 
an association may admit as members, or issue common stock, only 
to persons engaged in the production of the agricultural products 
to be handled by or through the association, including the lessees 
and tenants of land used for the production of such products and 
any lessors and landlords who receive as rent part of the crop 
raised on the leased premises. 

(b) If a member of a nonstock association be other than a 
natural person, such member may be represented by any individ- 
ual, associate, officer, or member thereof, duly authorized in 
writing. 

(e) One association organized hereunder may become a member 
or stockholder of any other association or associations, organized 
hereunder. 

1981, e. 87, a. 7. 

806. Articles of incorporatioti. Each association formed under 
this act must prepare and file articles of incorporation, setting 
forth : 

(a) The name of the association. 

(b) The purposes for which it is formed. 

(c) The place where its principal business will be transacted. 

(d) The term for which it is to exist, not exceeding fifty (50) 
years. 

(e) The number of directors thereof, which must not be lesa 
than five (5), and may be any number in excess thereof, and the 
terra of office of such directors. 

(f) If organized without capital stock, whether the property 
rights and interest of each member shall be equal or unequal; and 
if unequal, the articles shall set forth the general rule or rules 



NOBTH Cakolina Corpobation Code 281 

applicable to all members by which the property rights and inter- 
ests, respectively, of each member itiay and shall be determined 
and fixed ; and this association shall have the power to admit new 
members who shall be entitled to share in the property of the 
association with the old members, in accordance with such general 
rule or rules. This provision of the articles of incorporation shall 
not be altered, amended, or repealed except by the written con- 
sent or the vote of three-fourths of the members, 

(g) If organized with capital stock, the amount of such stock 
and the number of such shares into which it is divided and the 
par value thereof. The capital stock may be divided into pre- 
ferred and common stock. If so divided, the articles of incorpo- 
ration must contain a statement of the number of shares of stock 
to which preference is granted and the number of shares of stock 
to which no preference is granted and the nature and extent of 
the preference and privileges granted to each. 

The articles must be subscribed by the incorporators and ac- 
knowledged by one of them before an officer authorized by the 
law of this state to take and certify acknowledgments of deeds 
and conveyances; and shall be filed in accordance with the provi- 
sions of the general corporation law of this state; and when so 
filed, the said articles of incorporation, or certified copies thereof, 
shall be received in all the courts of this state, and other places, 
as prima facie evidence of the facts contained therein, and of the 
due incorporation of such association. A certified copy of the 
articles of incorporation shall also be filed with the chief of the 
division of markets. 

IB21, c. ST, a. S. 

607. Amendments to articles of incorporation. The articles 
of incorporation may be altered or amended at any regular meet- 
ing or any special meeting called for that purpose. An amend- 
ment must first be approved by two-thirds of the directors, and 
then adopted by a vote representing a majority of all the mem- 
bers of the association. Amendments to the articles of incorpora- 
tion, when BO adopted, shall be filed in accordance with the pro- 
visions of the general corporation law of this state. 

1921, c. 87, s. 9. 

608. By-laws. Each association incorporated under this act 
must, within thirty (30) days after its incorporation, adopt for 
its government and management a code of by-laws, not incon- 
sistent with the powers granted by this act. A majority vote of 
the members or stockholders, or their written assent, is neaeasarj', 



282 North Cabouna Corporation Code 

to adopt such by-laws. Each association under its by-laws may 
also provide for any or all of the following matters : 

(a) -The time, place, and manner of calling and conducting Its 
meetings. 

(b) The number of stockholders or members constituting a 
quorum. 

(c) The right of members or stockholders to vote by proxy or 
by mail, or by both, and the conditions, manner, form, and effects 
of such votes, 

(d) The number of directors constituting a quorum. 

(e) The qualifications, compensations, and duties and terms of 
ofBce of directors and officers ; time of their election, and the mode 
and manner of giving notice thereof. 

(f) Penalties for violations of the by-laws. 

(g) The amount of entrance, organization, and membership 
fees, if any ; the manner and method of collection of the same, and 
the purposes for which they may be used. 

(fa) The amount which each member or stockholder shall be 
required to pay annually or from time to time, if at all, to carry 
on the business of the association, the charge, if any, to be paid 
by each member or stockholder for services rendered by the asso- 
ciation to him, and the time of payment and the manner of collec- 
tion; and the marketing contract between the association and its 
members or stockholders which every member or stockholder may 
be required to sign. 

(i) The number and qualification of members or stockholders 
of the association and the conditions precedent to membership or 
ownership of common stock ; the method, time, and manner of per- 
mitting members to withdraw or the holders of common stoek to 
transfer their stock; the manner of assignment and transfer of 
the interest of members, and of the shares of common stock ; the 
conditions upon which, and time when membership of any member 
shall cease ; the automatic suspension of the rights of a member 
when he ceases to be eligible to membership in the association, 
and mode, manner, and effect of the expulsion of a member; 
manner of determining the value of a member's interest and pro- 
vision for its purchase by the association upon the death or with- 
drawal of a member or stockholder, or upon the expulsion of a 
member or forfeiture of his membership, or at the option of the 
association, by conclusive appraisal by the board of directors. Id 
case of the withdrawal or expulsion of a member the board of 
directors shall equitably and conclusively appraise his property 
interests in the association, and shall fix the amount, thereof in 



North Carolina Corporation Code 2S3 

money, which shall be paid to him within one year after such 
expulsion or withdrawal. 

1921, e. 87, a. 10. 

609. Oeneral and special meetingH; bow called. Id its by- 
l&ws each association shall provide for one or more regular meet- 
ings annually. The hoard of directors shall have the right to 
call a special meeting at any time, and ten per cent of the mem- 
bers or stockholders may file a petition stating the specific busi- 
ness to be brought before the association, and demand a special 
meeting at any time. Such meeting must thereupon be called by 
the directors. Notice of all meetings, together with a statement 
of the purposes thereof, shall be mailed to each member at least 
ten days prior to the meeting: Provided, however, that the by- 
laws may require instead that such notice may be given by publi- 
cation in a newspaper of general circulation, published at the 
principal place of business of the association. 

1921, c. 87, s. 11. 

■ 610. Directors; election. 

(a) The affairs of the association shall be managed by a board 
of not less than five directors, elected by the members or stock- 
holders from their own number. The by-laws may provide that 
the territory in which the association has members shall be 
divided into districts, and that the directors shall be elected ac- , 
cording to such districts. In such case the by-laws shall specify 
the number of directors to be elected by each district, the manner 
and method of reapportioning the directors and of redistricting 
the territory covered by the association. The by-laws may provide 
that primary elections should be held in each district to elect the 
directors apportioned to such districts, and the result of all such 
primary elections must be ratified by the next regular meeting of 
the association. 

(b) The by-laws shall provide that one or more directors shall 
be appointed by the director of agricultural extension or any other 
public official or commission. The directors so appointed need not 
be members or stockholders of the association, but shall have the 
same powers and rights as other directors. 

(c) A'n association may provide a fair remuneration for the 
time actually spent by its officers and directors in its service. No 
director, during the term of his office, shall be a party to a con- 
tract for profit with the association differing in any way from the 
business relations accorded regular members or holders of common [, 



284 North Caeouna Corpoeation Code 

stock of the aasociation, or to any other kind of contract differing 
from terms generally current in that district. 

(d) When a vacancy on the board of directors occurs, other 
than by expiration of term, the remaining members of the board, 
by a majority vote, shall fill the vacancy, unless the by-laws pro- 
vide for an election of directors by district. In such case the 
board of directors shall immediat«ly call a special meeting of the 
members of stockholders in that district to fill the vacancy : Pro- 
vided, that this subsection shall not apply to the director or 
directors appointed under the provisions of subsection (b) of this 
section: Provided further, that any vacancy occurring in the. 
office of a director appointed under subsection (b) of this section 
shall be filled in the same manner as the original appointment was 
made. 



611. Election of officers. The directors shall elect from their 
number a president and one or more Tiee presidents. They 
shall also elect a secretary and treasurer, who need not be 
directors, and they may combine the two latter offices and desig-* 
nate the combined office as secretary-treasurer. The treasurer 
may be a bank or any depository, and as such shall not be consid- 
ered an officer, but as a function of the board of directors. In 
such case the secretary shall perform the usual accounting duties 

, of the treasurer, excepting that the funds shall be deposited only 
as authorized by the board of directors, ■ 
1921, c. ST, B. 13. 

612. Stock ; membership certificates ; whra iasued ; voting* ; 
liability; limitation on transfer of ownership. 

(a) When a member of an association established without 
capital stock has paid his membership fee in full, be shall receive 
a certificate of membership. 

(b) No association shall issue stock to a member until it baa 
been fully paid for. The promissory notes of the members may 
be accepted by the association as full or partial payment. The 
association shall hold the stock as security for the payment of the 
note, but such retention as security shall not effect the members' 
right to vote. 

(e) Except for debts lawfully contracted between him and the 
association, no member shall be liable for the debts of the associa- 
tion to an amount exceeding the sum remaining unpaid on his 
membership fee or his subscription to the capital stock, including 



NOBTH CAKOLINA COBPOBATIOM CODB 286 

my unpaid balance on any proiuisBory notea given in payment 
thereof. 

(d) No stockholder of a co-operative association shall own more 
than one-twentieth of the common stock of the association; and 
an association, in its by-laws, may limit the amount of common 
stock which one member may own to any amount leas than one- 
twentieth of the common stock. 

(e) No member or stockholder shall be entitled to more than 
one vote. 

(f) Any association organized with stock under this act may 
issue preferred stock, with or without the right to vote. Such 
stock may he redeemable or retirable by the association on such 
terms and conditions as may be provided for by the articles of 
incorporation and printed on the face of the certificate. 

(g) The by-laws shall prohibit the transfer pf the common 
stock of the association to persons not engaged in the production 
of the agricultural products handled by the association, and such 
restrictions must be printed upon every certificate of stock subject 
thereto. 

(h) The association may at any time, except when the debts of 
the association exceed fifty per cent (50%) of the assets thereof, 
buy in or purchase its common stock at hook value thereof as eon- 
clnsively determined by the board of directors, and pay for it in 
cash within one (1) year thereafter. 
1931, e. 87, s. 14. 

613. Bemoyal of officer or director. Any member may bring 
charges against an officer or director by filing them in writing 
with the secretary of the association, together with a petition 
signed by ten per cent of the members, requesting the removal of 
the ofGcer or director in question. The removal shall be voted 
npon at the next regular or special meeting of the association, and 
by a vote of a majority of the members, the association may 
remove the officer or director and fill the vacancy. The director 
or officer against whom such charges have been brought shall 
be informed in writing of the charges previous to the meeting, and 
shall have an opportunity at the meeting to be heard in person 
or by counsel, and to present witnesses ; and the person or persons 
bringing the charges against him shall have the same opportunity. 

In case the by-laws provide for election of directors by districts, 
with primary elections io each district, then the petition for 
removal of a director must be signed by twenty per cent of the 
members. residing in the district from which he was elected. ,Tbft|p 



286 North Carolina Corpobation Code 

board of directors must call a special meeting of the members 
residing in that district to conaider the removal of the director. 
By a vote of the majority of the members of that district, the 
director in question shall be removed from office : I*rovided, that 
this section shall not apply to directors appointed under subsec- 
tion (b) of section twelve of this act. 
1921, c. 87, e. 15. 

614. Beferendum. Upon demand of one-third of the entire 
board of directors, any matter that has been approved or passed 
by the hoard must be referred to the entire membership of the 
stockholders for decision at the next special or regular meeting -. 
Provided, however, that a special meeting may be called for the 
purpose. 

1921, c. 87, a. 10. 

616. Marketing contract. 

(a) The association and its members may make and execute 
marketing contracts, requiring the members to sell, for any period 
of time, not over ten years, all or any specified part of their 
agricultural products or specified commodities exclusively to or 
through the association or any facilities to be created by the 
association. The contract may provide that the association may 
sell or resell the products of its members, with or without taking 
title thereto, and pay oyer to its members the resale price, after 
deducting all necessary selling, overhead, and other costs and 
expenses, including interest on preferred stock, not exceeding 
eight per cent per annum, and reserves for retiring the stock, if 
any; and other proper reserves; and interest not exceeding eight 
per cent per annum upon common stock. 

(b) The by-laws and the marketing contract may fix, as liqui- 
dated damages, specific sums to be paid by the member or stock- 
holder to the association upon the breach by him of any provision 
of the marketing contract regarding the sale or delivery or with- 
holding of products; and may further provide that the member 
will pay all costs, premiums for bonds, expenses and fees in case 
any action is brought upon the contract by the association ; and 
any such provisions shall be valid and enforceable in the courts 
of this state. 

(e) In the event of any such breach or threatened breach of 
such marketing contract by a member, the association shall be 
entitled to an injunction to prevent the further breach of the con- 
tract, and to a degree of specified performance thereof. Pending 
the adjudication of such an action, and upon filiiie a verified 

„z.dbrct>o^rc 



NOBTH Carolina Coepobation Code 287 

cofflplaiut showing the breach or threatened breach, and upon 
&lhig a sufficient bond, the association shall be entitled to a tempo- 
rary restraining order and preliminary injunction against the 
member. 

1921, c. 87, s. 17. 

616. Purchasing basiness of other aesociations, persons, flmu, 
or corporations; payment; atdck issued. Whenever an associa- 
tion organized hereunder with preferred capital stock, shall 
purchase the stock or any property, or any interest in any prop- 
erty of any person, firm, or corporation or association, it may 
by agreement with the other party or parties to the transaction 
discharge the obligations so incurred, wholly or in part, by ex- 
changing for the acquired interest shares ot its preferred cap- 
ital stock to an amount which at par value would equal a fair 
market value of the stock or interest so purchased, as determined 
by the board of directors. In that case the transfer to the asso- 
ciation of the stock or interest purchased shall be equivalent 
to payment in cash for the shares of stock issued. 

1921, c. 87, 8. 18. 

617. Annual reports. Each association formed under this act 
shall prepare and make out an annual report on forms fur- 
nished by the division of markets, containing the name of the 
association, its principal place of business, and a general statement 
of its business operations during the fiscal year, showing the 
amount of capital stock paid up, and the number of stockholders 
of a stock association or the number of members and amount of 
membership fees received, if a nonstock association; the total 
eipenses of operations; the amount of its indebtedness, or lia- 
bility, and its balance sheets. 

1921, c. 87, B. 19. 

618. Conflicting laws not to apply. Any provisions of law 
which are in conflict with this act shall not be construed as apply- 
ing to the associations heroin provided for. 

1921, c. 87, B. 20. 

619. Limitation of use of term "co-operatiTe." No person, 
firm, corporation, or association hereafter organized or doing busi- 
ness in this state shall he entitled to use the word "co-operative" 
as part of its corporate or other business name or title unless it 
has complied with the provisions of this act. 

Any person, firm, corporation, or association now organized and 
existing, or doing business in this state, and embodying the wocjllp 



288 NOBTH CaBOLINA COBPOBATION CODE 

"co-operative" as part of its corporate or other business oame or 
title, and which is not organized in compliance with the provisions 
of this act, must, within six months from the date at which this 
act goes ante effect, eliminate the word "co-operative" from its 
said corporate or other business name or title. 
1B21, e. 87, 8. 21. 

620. Interest in other corporoUons or aisociatioiiB. An as- 
sociation may organize, form, operate, own, control, have inter- 
est in, own stock of, or be a member of any other corporation or 
corporations, with or without capital stock, and engaged in pre- 
serving, drying, processing, canning, packing, storing, handling, 
shipping, utilizing, manufacturing, marketing, or selling of the 
agricultural products handled by the association, or the by- 
products thereof. If such corporations are warehousing corpora- 
tions, they may issue legal warehouse receipts to tbe association, 
or to any other person, and such legal warehouse receipts shall be 
considered as adequtae collateral to the extent of the current value 
of the commodity represented thereby. In case such warehouse 
is licensed or licensed and bonded under the laws of this state 
or the United States, its warehouse receipt shall not be challenged 
or discriminated against because of ownership or control, wholly 
or in part, by the association. 

1921, c. 87, B. 22. 

ffiZl. OoDtractB and agreement with other associations. Any 
association may, upon resolution adopted by its board of directors, 
enter into all necessary and proper contracts and agreements, and 
make all necessary and proper stipulations, agreements and con- 
tracts and arrangements with any other co-operative corporation, 
association, or associations, formed in this or in any other state, 
for the co-operative and more economical carrying oil of its busi- 
ness, or any part or parts thereof. Any two or more associations 
may, by agreement between them, unite in employing and using 
or may separately employ and use the same methods, means, and 
agencies for carrying on and conducting their respective busi- 
nesses. 

1921, c. 87, s. 23. 

ffi22. AsBOciation heretofore organized may adopt tbe pro- 
visions of this act. Any corporation or association organized 
under previously existing statutes may, by a majority 'vote of its 
stockholders or members, be brought under the provisions of this 
act by limiting its membership and adopting the othei: restrictions 



North Cab(hjna Corporation Code 289 

as provided herein. It shall make out in duplicate a atatemeot 
aigned and sworn to by its directors, upon forms supplied by the 
secretary of state, to the effect that the corporation or association 
has by a majority vote of its stoekholdera or members dedded to 
accept the benefits and be bound by the provisions of this act, 
arlides of incorporation shall be filed as required in section eight, 
eicept that they shall be signed by the members of the board of 
directors. The filing fee shall be the same as for filing an amend- 
ment to articles of incorporation, 
1921, c. 87, 8. 24. 

623. Misdemeanor ; breach of marketiii; contract of co-opera- 
tive associations; spreading false reports about the finances or 
management thereof. Any person or persons, or any corpora- 
tion whose officers or employees knowingly induces or attempts to 
induce any member or stockholder of an association organized 
hereunder to breach his marketing contract with the association, 
or who maliciously and knowingly spreads false reports about the 
finances or management thereof shall be guilty of a misdemeanor 
and subject to a fine of not less than one hundred dollars ($100), 
and not more than one thousand dollars ($1,000), for such offense 
and shall be liable to the association aggrieved in a civil suit in 
the penal sum of five hundred dollars ($500) for each such of- 
fense : Provided, that this section shall not apply to a bona fide 
creditor of any member or stockholder of such association, or the 
agents or attorney of any such bona fide creditor, endeavoring to 
make collection of the indebtedness. 



624. Associations not in restraint of trade. No association 
organized hereunder shall be deemed to be a combination in re- 
straint of trade or an illegal monopoly ; or an attempt to lessen 
competition or fix prices arbitrarily, nor shall the marketing con- 
tracts or agreements between the association and its members, or 
any agreements authorized in this act be considered illegal or in 
restraint of trade, 

1921, e. 67, e. 86. 

68S. CoDStitutionali^. If any section of this act shall be 
declared unconstitutional for any reason, the remainder of the act 
shall not be affected thereby. 

1»21, <!. 87, a. 27. 

636. Application of general corporation laws. The provi- 
sions of the general corporation laws of this state, and all pollers 

r.„z.db,.C.003le 



290 NOBTH CAEOLINA COEPOEATION CODE 

and rights tbereimder, shall apply to the associations organized 
hereunder, except where such provisions are in conflict with or 
inconsistent with the express provisions of this act. 
1921, c. S7, s. 28. 

627. Annual license fees. Each association organized here- 
under shall pay an annual license fee of ten dollars ($10), but 
shall be exempt from all franchise or license taxes. 

1921, c. 87, 8. 39. 

628. Filisj; fees. For filing articles of incorporation, an as- 
sociation organized hereunder shall pay ten dollars ($10) ; and 
for filing an amendment to the articles, two dollars and one-half 
($2.50). 

1921, e. 87, 9. 30. 



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CHAPTER VII. 

DRAINAGE BY CORPORATIONS. 
ABT. 1. MANNER OF OBGANIZATION. 

Section 

Petition filed in sapetior eonrt 629 

ConuniBsioner appointed; report required 630 

SnTTeyor employed 631 

CoDilnnatioa of report ... 63'J 

Proprietors become a corporation 633 

Corporate name; oCGcerg; powers 634 

Incorporation of canal already conatructed 635 

AET. 2. BIGHTS AND LIABILITIES IN THECORPOltATION. 

Sbarea of stock annexed to land 636 

Bhareholders to pay asaesamenta 63T 

yame of districts 638 

ABT. 1. MANNER OF ORGANIZATION. 

629. Petition filed in superior coort. Any proprietor in fee of 
swamp lauds, whieh cannot be drained except by cutting a canal 
througtt the lands of another or other proprietor in fee, situated 
at a lower level and which would also be materially benefited 
by the cutting of such canal, who desires that such canal be cut 
on the terms on which it is hereinafter allowed, may apply by 
petition, setting forth the facts, to the superior court of the 
cotinty in which any of the lands through which the canal will 
pass may lie. 

C. S., B. 5295; Bev., s. 3996; Code, s. 1311; 1868-9, c. 164, a. 2. 

I>raiiis §81. When properly construed, section furnisheB a summary 
metbod of collecting theBe assesamentB without reBOrting to the Superior 
Court. Uiddle Canal Co. v. Whitley, 172 N. C. 100, 90 S. E. 1. 

630. Conunissioners appointed; report required. On the es- 
tablisliment by the petitioner of his allegations, the court shall 
appoint three persons as commissioners who, having been duly 
sworn, shall examine the premises and inquire and report: 

1. Whether the lands of the petitioner can be conveniently 
drained otherwise than through those of some other person. 

2. Through the lands of what other persons a canal to drain 
the lands of the petitioner should properly pass, considering the 
interests of all concerned. 

3. A description of the several pieces of lands through which 
the canal -would pass, and the present values of such portioi^fijb [<; 



292 North Cabolina Corpobation> Code 

the pieces of lands as would be benefited by it, and the r 
for arriving at the conclusion as to the benefit. 

4. The route and plan of the canal, including its breadth, 
depth, and slope, as nearly as they can be caloiilated, with all 
other particulars necessary for calculating its cost. 

5. The probable cost of the canal and of a road on its bank, and 
of such other work, if any, as may be necessary for its profitable 
use. 

6. The proportion of the benefit {after a deduction of all 
damages) which each proprietor would receive by the proposed 
canal and a road on its bank if deemed necessary, and in which 
each ought, in equity and justice, to pay toward their construc- 
tion and permanent support. 

7. With their report they shall return a map explaining, as 
accurately as may be, the various matters required to be stated 
in their report. 

C. 8., B. 5206; Rev., s. 5967; Code, a. 1312; 1868-9, c. 164, a. 3. 

Drains 6 76. Though no notice of meeting for preliminary inapection for 



dulj ratified and confirmed at a subsequent meeting regularly called and 
held in accordance with statute, — Middle Canal Co. v. Whitley, 172 N. C. 
100, 90 S. E. 1. 

631. Suirqror employed. The commissioners may employ a 
surveyor to prepare the map required to accompany their report. 

C. S., B. 5297; Bev., a. 3998; Code, s. 1313; 1868-9, c. 164, s. 4. 

632. Confirmation of report. If it appear that the lands on 
the lower level will be increased in value twenty-five per cent or 
upwards by the proposed improvement, within one year after 
the completion thereof, and that the cost of making such improve- 
ment will not exceed three-fourths of the present estimated value 
of the land to be benefited, and that the proprietors of at least 
one-half in value of the land to be affected consent to the im- 
provement, the court may confirm such report, either in full or 
with such modifications therein as shall be just and equitable. 

C. S., s. 5298; Eev,, s. 3999; Code, s 1314; 1868-9, c. 164, a. 5. 

633. Proprietors become a corporation. Upon a final adjudica- 
tion, confirming the report, the proprietors of the several pieces 
of land adjudged to be benefited by the improvement shall be 
declared a corporation, of which the capital stock shall be double 
the estimated cost of the improvements, and in which the several 
owners of the land adjudged to be benefited shall be corporators, 
holding shares of stock in the proportions in which they are ad- 



NOBTH CABOLIMA COSPORATION CODE 293 

judged liable for the expense of making and keeping op the 
improvement. 
C. S., S299; Bev., s. 4000; Code, a. 1316; 1668-9, e. 164, b. 6. 

634. Corporate name; officers; powers. The person assessed 
to pay the highest sum shaU be president of the company until 
another shall be elected ; be shall, or in case of his refusal or an 
nnreasonafale delay, any other stockholder may, call a meeting 
of the corporators. The corporators shall choose a corporate 
name, elect a president and such other officers as may be necessary 
and make all by-laws and regulations, not contrary to law, which 
may be necessary or proper for effecting the purposes of the 
corporation; they 'shall fix the number of shares of stock, and 
assign to each proprietor, his proper number ; they shall assess the 
sums which shall be payable by each proprietor, and to ascer- 
tain the time and mode of payment in every meeting each pro- 
prietor shall vote once for each share owned by him. 

C. 8., a. S30O; Bev., a. 4001j Code, 3. 1316; IS68-9, c. 164, b. T. 

635. Inoorp<aution of canal already constmoted. Whenever 
the proprietors of any canal already cut shall desire to become 
incorporated, any number of the proprietors, not less than one- 
third in number, may file their petition before the clerk of the 
superior court of the county in which the canal is located, or in 
either comity, where the canal may be located in more than one 
county, setting forth the names of the proprietors, the length and 
size of the canal, the name of the owners of land draining in such 
canal, and the quantity of land tributary thereto. And upon 
filing the petition, summons shall issue to all parties having an 
easement in the canal, returnable as in other special proceedings; 
upon the return thereof, or upon a day fixed by the elerk for 
hearing same, all owners of the canal may become corporators 
therein, and upon failure of any to avail themselves of that right, 
they shall not be enljtled to become corporators, except under 
such by-laws and regulations as such corporation shall make and 
declare. But those who fail to avail themselves of the benefit 
of this subchapter shall not be deprived of their easement in the 
canal, but shall eujoy the same upon payment to the corporation 
of the assessment made upon them pro rata with the corporators ; 
such assessment shall be made on the land tributary to the canal 
and apportioned pro rata to each owner thereof; it shall be made 
by the corporation on ten days' notice to each owner of the land, 
under such rules and regulations as the by-laws may prescribe; 
but any person dissatisfied tlierewith shall have the right to ap- 



294 North Carolina Cwipoeation Code 

peal to a jury at the regular term of the superior court of the 
county, and the amount of damages assessed shall be a first lien 
on the land of the owner against whom judgment shall be ren- 
dered : Provided, that in making such assessment upon land- 
owners who are not members of the corporation it shall be tm- 
lawful to charge in such assessment any charges or per diem pay 
for the officers of such canal company against the owner of such 
land, and any such attempt to charge the salaries of per diem of 
officers of the canal company in such assessment shall render the 
same void. 

C. S,. 8. 5301; Rev., s. 4008; 1889, e. 380; 1901, c. 670. 

ART. 2. RIGHTS AND LIABILITIES IN THE 
CORPORATION. 

636. Shares of stock annexed to land. The ownership of the 
shares of stock is indissolubly annexed to the ownership of the 
pieces of land adjudged to be benefited 'by the improvement; 
and such shares, or a part thereof proportionate to the area of 
such land that may descend or be conveyed for any longer time 
than three years, shall, upon such descent or conveyance, de- 
scend and pass with the land, even although such shares be not 
mentioned in the deed of conveyance, and although their transfer 
be forbidden by such deed so that every owner of such land in 
possession, except tenant for a term of years, not exceeding three, 
and every owner in reversion or remainder after a term not ex- 
ceeding three years, shall, during his ownership, be entitled to 
all the rights and privileges and be subject to all the obliga- 
tions and burdens of a corporator. Every attempted sale of 
shares otherwise than as annexed to the land shall be void. 

C. 8., 9. 5302; Bev., s. 4002; Code, b. 1317; 1868-6, c. 164, a. 8. 

637. Sliareliolders to pay assessments. Every corporator shall 
be bound to obey the lawful by-laws of the company, and pay 
all dues lawfully assessed on him : Provided, he shall in" no ease 
pay more than his proportion of the expenses as fixed by this 
subchapter; and such dues may be collected in the corporate 
name in any court having jurisdiction; and every assessment 
duly docketed in the county where the land to be affected lies 
shall be a lien on the lands of the debtor which are connected 
with the corporation from the date of such docketing. 

C. S., 8. 5303; Rev., b. 4003; Code, a. 1318; 1868-9, c. 104, 8. 9. 

Drains g 32. A drainage asBessmeiit, unless void oa ita face, cannot be 
attacked coliaterally.— Middle Canal Co. v. Wliitley, 172 N. C. 100, 90 
S. E. 1. /--I 

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North Carolina Corporation Code 295 

Dnlns gB2. If there is an irregularity in a drainage aassBBnieiit which 
dou not avoid it on its face, it is the dntf of one assessed to appeal to the 
diatriet for correction. — Ibid. 

Dnlns §88. The drainage district cannot sue the person assessed, th« 
liability attaching to the land being collectible only by proceedings in rem 
in equity, nor, if the land is inanfQcient to pay the assessment, can the 
balance be collected from the landowner. — Ibid. 

Drains §90. A personal judgment cannot be rendered against land- 
oimer, since only land is liable. — Long Creek Drainage Diat. v. Huffstetler, 
173 N. C. 623, 92 8. E. 368. 

638. Name of disMcts. The name of such draioage district 
shall constitute a part of its corporate name; for illustration, 
the board of drainage eommisBioners of Mecklenburg Drainage 
District, No. 1. ■ In the naming of a drainage district the clerk of 
the court, notwithstanding the name given in the petition, shall 
so change the name as to make it conform to the county within 
which the district, or the main portion of the district, is located, 
and be also designated by number, the number to indicate the 
number of districts petitioned for in the county. For illustra- 
tion, the first district organized in Mecklenburg County would 
be Mecklenburg County Drainage Distriijt, No. 1 ; name of the 
second would be Mecklenburg County Drainage District, No. 2; 
the fifth one organized would be Mecklenburg County Drainage 
District, No. 5 : Provided, that so much of this section as provides 
for numbering the districts in each county shall not apply to dis- 
tricts in which bonds have been issued and sold prior to the fifth 
day of March, one thousand nine hundred and seventeen.' 

C. S., B. S338; 1909, c. 442, b. 19; 1917, c. 152, s. IT. 



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CHAPTER VIII. 
RUEAL COMMUNITIES. 

AET. 1. OEGANIZED BUBAL COMMUNITLES. 

Section 

Petition for ineorporatiou 639 

Certificate of incorporation 640 

Conmnnity meetings 641 

Board of directors elected 642 

Duties of board of directors; compeuaatioii 643 

Leg^islative powers of commuaities 644 

Power to tax and to issue bonds 945 

Majority vote for tax levy; collection 646 

Directors may act as election, offlcerg; result certified to el<BTk of eovnty 

, eommissiouers 647 

Supervision by bureau of community service 64S 

Standards for production and marketing of produce 64S 

Violation of community ordinances a misdemeanor; community mag- 
istrates 650 

Police officers 651 

Precinct registrars to compile liats of registered voters €S2 

ABT. 2. ESTABLISHMENT OP CONVENIENCES IN BUBAL 
• COMMUNITIES. 



Assistance by state highway 

Appropriation made oa* 

ABT 3. BOND-ISSUING DISTBICTS INCOBPOBATBD. 
Variom districts issuing bonds incorporated 655 

ABT. 1. ORGANIZED RURAL COMMUNITIES. 

639. Petition for incorporation. The people o£ any rutal com- 
munity in North Carolina, upon petition signed by a majority 
of the regietered voters of such community embracing in area 
one entire school district, may be incorporated under the pro- 
visions of this article, the title of such corporate body being 

"The Community of County" 

{or counties), the name of community and county (or countiee) 
to be supplied in the petition for incorporation : Provided, that 
no part of such community shall be nearer than two miles to the 
nearest boundary of any incorporated town or city of five thou- 
sand or more inhabitants, and nothing in this article shall be con- 
atrued to prevent the extension of the limits of any town or city 
regularly incorporated so as to include territory incorporated 
under this article. After any school district has been incorpo- 
rated under the provisions of this article the boundaries of such 
school district and incorporated rural community may be changed 

DidilizedbyCoO^^IC 



North Carolina Corporation Code 297 

odIj' in the manner prescribed by law for changing the lines of a 
special-tax school district, except that the county board of edu- 
cation shall proceed to enlarge such boundaries in accordance 
with law' upon the written request of a majority of the school 
committeemen or trustees of said school district and a written 
request of a majority of the board of directors of the incorpo- 
rated rural community. 
C. S., a. 7380; 1919, c. 202, b. 1. 

640. Certificate of incorporation. The petition for incorpora- 
tion shall he addressed to the secretary of state at his office in 
Raleigh, who, if such petition is in due form, shall then issue the 
certificate of incorporation without charge therefor. 

C. 8., B. 7381; 1919, c. 202, b. S. 

Unnlclpal Oorporatlona g IS. Under the authority of the attorney -gone rut 
to sue to anQul the (charter of a corporation on the f^round that it was pro- 
cured on a frandulent tuggestion or concealment of a material fact, he may 
sue to annul the charter of a rural community obtained on the falae aug- 
geetioa that it consiated of one entire school district, when in fact it wae 
romposed of parts of three. — Manning v. Bama Bural Community, 109 8. E. 
376. 

641. Commnnity meetings. The registered voters of each com- 
munity incorporated under the provisions of this article shall 
hold a public community meeting on the first Saturday in Jan- 
uary of each year, or on such other day as may be specified in the 
petition for incorporation. The place of such meeting shall also 
be designated in the petition for incorporation ; but the time or 
place, or both, may be changed at any annual meeting to take ef- 
fect at the following annual meeting, notice of such change to be 
posted in three public places in such community. At such an- 
nual community meeting the voters may adjourn to meet at some 
other specified date, and other meetings may be held upon peti- 
tion signed by ten per cent of the registered voters of the com- 
munity, provided notice of such meeting is posted at three public 
places in such community at least two weeks prior to such meet- 
ing. Questions involving the levy of any tax, however, shall be 
decided only at the regular annual community meeting. 

C. 8., a. 7382; 1919, c. 202, b. 3. 

642. Board of directors elected. At each annual community 
meeting, as provided in section 7382 (herein 641), the voters shall 

elect three persons to be known as the "Board of Directors of 

Community," one of whom shall be designated as chairman and i 



298 North Caeolina Corpoeation Code 

another as secretary-treasurer, each performing the duties sug- 
gested by his title. 

C. S., a. 73SS; 191P, e. 202, a. 4. 

MS. Duties of board oi directors; compeiisation. The board 
of directors of such community shall be charged with the duty of 
enforcing and executing such ordinances as the community 
meetings may adopt; and performing such other functions not 
inconsistent with the laws of North Carolina or the United States 
as the conununity meetings may direct. The annual compensa- 
tion, if any, of such board of directors, or any member thereof, 
shall be fixed at each annual meeting. 

0. S., s. 7384j 1919, c. 202, a. 5. 

644. Legislative powers of communities. At each meeting of 
the registered voters of a community they shall have the right to 
adopt, amend, or repeal ordinances, provided such action is not 
inconsistent with the laws of North Carolina or the United States, 
concerning the following subjects: The public roads of the com- 
munity; the public schools of the community; regulations in- 
tended to promote the public health ; the police protection ; the 
abatement of nuisances; the care of paupers, aged or infirm per- 
sons; to encourage the coming of new settlers; the regulation of 
vagrancy; aids to the enforcement of state and national laws; 
the collection of community taxes; the establishment and sup- 
port of public libraries, parks, halls, playgrounds, fairs, and 
other agencies of recreation, education, health, music, art, and 
morals: Provided, that nothing herein contained shall be eon- 
atrued to mean that any commonity incorporated under the pro- 
visions of this article shall lose its identity as a part of the road 
and school systems of the county or counties in which it is lo- 
cated, nor lose its right to participate the same as before incor- 
poration in the benefits to be derived from county or township 
funds raised by taxation or otherwise for building or maintaining 
the public roads, for the public schools, for public health, or for 
other public uses. 

C. S., H. t385; 1919, c. 202, s. 6. 

645. Power to tax and to issue bonds. For the promotion of 
any of the objects mentioned in section 7385 (herein 644), the 
registered voters of any incorporated community, in annual com- 
munity meeting assembled, shall have the right to levy taxes or 
issue bonds upon the property of the community, within limits 
hereinafter set forth, either for specific purposes or for the gen- 



North Carolina Corporation Code 299 

era! nse of the commimity iipon a method of tax division among 
varying objects as agreed upon by each annual community meet- 
ing. The aggregate of taxes levied for such community purposes 
shall not exceed five mills annaatly on each dollar of taxable prop- 
ert; valuation of the community. Any tax imposed or levied un- 
der the provisions of this article may be revoked only in the man- 
ner prescribed by law for revoking special taxes in a special-tax 
school district. 
C. 8., 9. 7386; 1919, e. 202, b. 7. 

H6. Majority TOte for tax levy; collection. No community 
meeting may levy a tax unless a majority of the registered voters 
of the community are present at snch meeting and vote by ballot 
for such tax ; hut at any annual community meeting a majority 
of the voters present, whatever their number, may vote to sub- 
mit the question of levying such a tax to the qualified voters 
of the community at an election to be held not earlier than thirty 
days subsequent to such meeting. If the community meeting 
shall desire to submit separately the question of tax levy for 
different purposes, it shall mention a name of not more than six 
words by which each such tax shall be designated, as for exam- 
ple, "Road Tax," "Public Library Tax;" or such community 
meeting may submit the question of a tax levy for various pur- 
poses under the title "For Community Tax." At the election 
herein provided for each voter may deposit a ballot marked 
"For Tax" or "Against Tax;" and i£ a ma- 
jority of the qualified voters of the community at such election 
shall vote for such tax, then the proposed tax levy shall be en- 
forced and the tax collected at the same time and in the same 
manner as state and county taxes are now collected, or such in- 
corporated community through its board of directors may name 
a collector of community taxes and fix his compensation, requir- 
ing both tax collector and treasurer to give bond for proper 
amounts. 
C. 8., a. 7387; ISIB, c, 202, a, 8. 

647. Directors may act as election ofiBcers; result certified to 
clerk of county commissioaers. At any election herein provided 
for, the board of directors may act as election officers, judges of 
election, etc., and the ballots shall be counted, compared, can- 
vassed and returned in the same manner as is now provided for 
general elections in the various counties of the state. The result 
of any such election shall be certified by the secretary of the 
hoard of directors of the community to the clerk of the board of 

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300 North Carolina CtntPORATioN Code 

county commiasionera, who shall record the same in the minutes 
of the said board of county commissioners, and no farther record- 
ing or declaring of the result shall be necessary. 
C. 8., i. 73S8; 1919, c. 202, i. 6. 

648. Snperrision by bnrean of commmiity service. The bureau 
of community aerviee, now directed by the state departments of 
education, agriculture, and health, the state college of agricul- 
ture and engineering, and the state normal and industrial college, 
is hereby charged with the duty of securing from the communi- 
tiea of the state incorporated under this article reports as to what 
each community is doing for the promotion of the purposes men- 
tioned in section 7382 (herein 644) ; and the aforesaid bureau of 
community service shall furnish the officers of such incorpo- 
rated communities forms for keeping records, accounts, etc., and 
for making reports. The bureau shall also provide forms and in- 
structions to citizens of the state desiring to petition for incor- 
poration under the provisions of this article, and shall publish 
annually a summary of the work accomplished by incorporated 
communities. The members of the board of directors of such 
incorporated communities are required to render such reports to 
the bureau of community service, and to post copies of same, to- 
gether with an itemized statement of receipts, disbursements, 
and balances for the year, in three public places in the commu- 
nity, under the penalty, upon conviction, of a fine of ten dollars 
each. All printing required under this article shall be paid for 
by the state department of education. 

C. a., i. 7389; 1919, c. 202, s. 10. 

640. Standards for production and marketing of produce. The 
board of directors may adopt standards for the production and 
marketing of produce, canned vegetables, etc., and may adopt 
labels, trade names, and brands for the same, and regulate their 
use, requiring the inhabitants of said community to comply with 
the standards set and adopted by the directors before they can 
use the brand, trade name, or labels for said community ; and the 
board of directors may adopt such regulations as may be neces- 
sary to protect said brands, trade names, etc., may have an in- 
spection of the goods sold thereunder, and may take any and 
all necessary steps looking to a system of community standard 
production, and of co-operative community marketing. 

C. 8., s. 7390; 1919, c. 202, b. 11. 



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North Carolina Corporation Code 301 

HSO. Tiolstioa of commimity ordinanoeB a misdemeanor; com- 
laiuii^ magifltrates. Any person violating any ordinance 
adopted tinder the provisions of this article or any rale made by 
the board of directors or other governing authority authorized 
by any of the provisions of this article, shall be guilty of a misde- 
meanor, and upon conviction shall be imprisoned not exceeding 
thirty days or fined not exceeding fifty dollars, or both, at the 
discretion of the court. Any .magistrate residing within the 
boundaries of a community incorporated under this article shall 
have power to hear and try all cases arising from violation of 
ordinances adopted by such community. If there is no magis- 
trate residing within the boundaries of the community, or if the 
community shall desire an additional magistrate, there shall be 
nominated at each annual meeting some suitable person living 
within the confines of the community who shall, upon proper cer- 
tification of nomination, be appointed community magistrate by 
the governor of the state, with all the powers of a magistrate 
within the bounds of said community. 
C. B., B. 7391; 1919, c. 202, b. 12. 

661. Police offlcers. The board of directors of any community 
organized under the provisions of this article are authorized and 
empowered to employ one or more policemen for the community, 
whose duties and powers shall be those prescribed by law for 
constables for the townships in the various counties of the state ; 
and the said policemen shall receive as compensation the same 
tees that are now prescribed by law for constables. 

C. S., B. 7392; 1919, c. 202, a. 13. 

652. Precinct registrars to ctnnpile lists of registered voters. 
Each person charged with the duty of registering voters in an 
■ election precinct embraced in whole or in part in any incorporated 
community shall furnish the chairman of the board of directors 
of such incorporated community a complete list of the registered 
voters in his precinct at the preceding state election, and from 
snch list the board of directors shall compile an official list of 
registered voters residing in the community for use in connection 
with the enforcement of this article ; such registrar receiving 
one-half cent for each name so furnished, to be paid for by the 
eommnnity. 

C. 8., B. 7393; 1919, b. 302, b. 14. 



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302 North Cabolina Corporation Code 

art. 2. establishment op conveniences in rural 
communities. 

663. Assistance hj state highway ocHnminion. In order to as- 
sist in providing for better and more comfortable living coudi- 
tions in the rural sections throughout the state, by means of the 
utilization of the many small waterpowcrs that aboimd in maoy 
parts of the state, and by the installation of water systems iu 
rural homes, and by the construction of rural telephone lines, 
the state highway coinmiBsion is herewith authorized to advise 
and assist in providing a water supply and electric power and 
electric lights for rural communities and individuals outside of 
incorporated towns, by investigating water-powers and prepar- 
ing plans for their development and the installation of such ap- 
paratus as may be needed to utilize such water-power in develop- 
ing electric power and for supplying a water system and electric 
light system, and to furnish plans and specifications for the in- 
Btallation of rural telephone lines and to advise and assist in the 
formation of rural mutual telephone systems. 

C. S., B. 7394; 1917, c. 267, a. 1. 

654. Appropriation made. For the purpose of carrying out 
the provisions of this article there is hereby appropriated out of 
any moneys in the state treasury not otherwise appropriated the 
Sinn of five thousand dollars annually, the sum to be drawn upou 
as directed by the state highway commission, 

C. S., 8. 7395; 1917, e. 267, s. 3. 

ART. 3. BOND-ISSUING DISTRICTS INCORPORATED. 

665. Various districts isstdng bonds incorporated. The inhabi- 
tants of every road district, special road district, school district, 
graded school district, or other district, in the name of which, or 
on behalf of which, bonds or other evidonees of iudebti'duess are 
authorized by law to be issued, shall, for alt purposes relating 
to the issuance or payment of such bonds or other evidences of 
indebtedness, constitute a body politic and corporate under the 
name given by law to such district ; and all such bonds or other 
evidences of indebtedness hereafter issued shall be obligations 
of such corporation. The board or body authorized by law to 
issue such bonds or other evidences of indebtedness may adopt 
a seal for such corporation, and shall, except as otherwise pro- 
vided by law, have and exercise all the powers and perform all 
the duties of such corporation relating to the issuance or pay- 
ment of such bonds or other evidences of indebtedness^ This 
article shall not apply to any notes or bonds heretofore issued, 

v.. S., s. 300; 1919, e. 308. 



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CHAPTER IX. 

WAKEHOUSES. 

ABT. 1. PUBLIC WAREHOUSES. 

SectioQ 

Who may become public w&rehousenien ^^^ 

Bond reqnired ■ *57 

PerBon injured may sue on bond ^8 

InBurancB requited; storage receipts 659 

Books of account kept; open to inspection 660 

Unlawful disposition of property stored 661 

ABT. 2. LEAP TOBACCO WAEEHOUSES. 

Minimum warehouse charges 662 

Oath of tobacco weigher 663 

WaiehoDse proprietor to render bill of charges; p«nalty 664 

AET. 1. PUBLIC WAREHOUSES. 

666. Who may become public warehousemen. Any person oi- 
any corporation organized under the laws of this state and whose 
charter authorizes it to engage in the business of a warehouse- 
man, may become a public warehouseman and authorized to keep 
and maintain public warehouses for the storage of cotton, goods, 
wares, and other merchandise as hereinafter prescribed and upon 
giving the bond_ hereinafter required. 

C. S., 8. 5118; Eev., a. 3029; 1901, c. 678; 1919, e. 212. 

667. Bond required. Every person or every corporation so or- 
ganized under the preceding section, except such as shall have a 
capital stock of not less than five thousand dollars, to become a 
public warehouseman flhall give bond in a reliable bonding or 
surety company, or an individual bond with sufficient sureties, 
payable to the state of North Carolina, in an amount not less than 
ten thousand dollars; to be approved, filed with and recorded by 
the clerk of the superior court of the county in which the ware- 
house is located, for the faithful performance of the duties of a 
public warehouseman ; but if such person or corporation has a 
capital stock of not leas than five thousand dollars, then it shall 
not he required to give the bond mentioned in this section. 

C. B., s. 5119; Eev., s. 3030; 1901, c. 678, s. 2; 1905, c. 540; 1908, c. 56; 
1919, e. 212. 

658. Person injtired may sue on bond. Whenever such ware- 
hoQseman fails td perform any duty or violates any of the pro- 
visions of this chapter, any person injured by such failure or vio- 
lation may bring an action in his name and to his own userifl.aBHrjjp 



304 North Cabolina Corporation Code 

court of competent jurisdiction on the bond of said warehouse- 
man. 

C. S., B. E120; Rev., b. 3031; 1901, c. 67S, b. 3. 



I § 24. WaTebousemen ai 
for damages caused by their negligenije.— 
ing Co., 134 N. C. 232, 32 8. E. 555. 

War«)ion8«D«Il %3i. The measure of damages for property damaged 
while in storage is the dtfTereni^e between the market value of the prop- 
erty damaged and the property whole, on the day it was delivered to the 
bailor. — Motley v. Southern FiniBhing Co., I2S N. C. 347, 30 S. £. 3. 

659. InsTiraiLGe required; storage receipts. Every such ware- 
houseman shall, when requested thereto in writing by a party 
placing property with it on storage, cause such property to be 
insured; every such warehouseman shall give to each person de- 
positing property with it for storage a receipt therefor. All 
warehouse receipts issued by warehousemen complying with the 
provisions of this chapter shall be valid and binding in the hands 
of all bona fide holders for value without registration. 

C. a, 8. 5121; Bev., s. 3032; IBOl, e. 678, s. i; 1905, e. 540, b. 2. 

660. Bo(^ of account kept; open to insjiection. Every such 
warehouseman shall keep a book in which shall be entered an 
account of all its transactions relating to warehousing, storing, 
and insuring cotton, goods, wares, and merchandise, and to the 
issuing of receipts therefor, which books shall be open to the in- 
spection of any person actually interested in the property to 
which such entry relates. 

C. 8., B. 5122; Rev., b. 3035; ISOl, c. 678, 8. 7. 

661. Unlawful disposition of property stored. If any person 
unlawfully sells, pledges, lends, or in any other way disposes of 
or permits or is a party to the unlawful selling, pledging, lend- 
ing, or other disposition of any goods, wares, merchandise, or 
anything deposited in a public warehouse without the authority 
of the party who deposited the same, he shall be punished by a 
fine not to exceed two thousand dollars and by imprisonment in 
the state's prison for not more than three years; but no officer, 
manager, or agent of such public warehouse shall be liable to the 
penalties provided in this section unless, with the intent to injure 
or defraud any person, he so sells, pledges, lends, or in any other 
way disposes of the same, or is a party to the selling, pledging, 
lending, or other disposition of any goods, wares, merchandise, 
article, or thing so deposited. 

C. S., S. 6123; Rev., s. 5831; 1901, c. 678, s. 11. 

DiyilzcdbvCoO^^IC 



NOBTH Carolina Cobpobation Code 305 

ART. 2. LEAF TOBACCO WAREHOUSES. 

662. M'^Timi''" warehouse charges. The charges and expenses 
of handling and selling leaf tobacco upon the floor of tobacco 
varehousea shall not exceed the following schedule of prices, viz : 
For auction fees, fifteen cents on all piles of one hundred pounds 
or less, and twenty-five cents on- all piles over one hundred 
pounds; for weighing and handling, ten cents per pile for all 
piles less than one hundred pounds, for all piles over one hun- 
dred pounds at the rate of ten cents per hundred pounds; for 
commissions on the gross sales of leaf tobacco in said warehouses, 
not to exceed two and one-half per centum. 

C, S., B. 5124; Bev., a. 3042; 1895, e. 81. 

663. Oat^ of tobacco weigiier. All leaf tobacco sold upon the 
floor of any tobacco warehouse shall first be weighed by some re- 
hable person, who shall have first sworn and subscribed to the 
following oath, to wit: "I do solemnly swear (or afiirm) that I 
will correctly and accurately weigh all tobacco offered for sale 

at the warehouse of , and correctly test and keep 

accurate the scales upon which the tobacco so offered for sale is 
weighed." Such oath shall be filed in the office of the clerk of 
the superior court of the county in which said warehouse is situ- 
ated. 

C. 8., 8. 5125; Bev., b. 3043; 18»5, c. 81, a. 2. 

664. WairehooBe proprietor to render bill) of charges ; penalty. 
The proprietor of each and every warehouse shall render to each 
seller of tobacco at his warehouse a bill plainly stating the 
amount charged for weighing and handling, the amounts charged 
for auction fees, and the commission charged on such sale, and 
it shall be unlawful for any other charges or fees to be made or 
accepted. For each and every violation of the provisions of this 
article a penalty of ten dollars may be recovered by any one in- 
jured thereby. 

C. S., a. 512fl; Bev., a. 3044; 18S5, e. 81, aa. 3, 4. 



sdbyGoOgIC 



CHAPTER X. 
RAILROABS. 

AETICLES OF ASSOCIATIONS, OFFICERS, AND STOCK OP 
BAILBOADS. 

BeetioB 
Prerequieites of flUng; stock subBcription ; affidavit of diTeetore; pa7- 

ment of fees 66(t 

Copy of articles evidence of incorporation 667 

Opening of subscription books 66B 

How stock paid for; forfeiture for non-payment . . . 669 

Increase of capital stock 670 

Liability for unpaid stock to laborers; notice to stockholder . . 671 

Liability of trustees and other fiduciaries holding stock 672 

Directors and president 673 

Appointment of ofHcers and agents 671 

Officials to account to successors 675 

Failure of certain railroad officers to account with successors . . 676 

Counties may subscribe stock 677 

On dissolution or sale of railroads pnrchaser becomes a corporation . 678 

Goads not to be established unless authorized by law 679 

Actions for penalties to be in name of state SSO 

This chapter contains only the sections which relate to the organization 
of and requisites for doing business by railroads; and county aid for 
railroad construction, 

665. Articles of association; contents; signature; filing. Anj* 
number of persons, not less than six, at least one of whom sh&ll 
be a citizen and resident of this state, may form a company for 
the purpose of constructing, maintaining and operating a rail- 
road for public use in the conveyance of persons and property, 
or for the purpose of maintaining and operating any unincorpo- 
rated railroad already constructed for the like public use; and 
for that purpose may make and si^n articles of association, in 
which shall be stated the name of the company, the number of 
years the same is to continue, the places from and to which the 
road is to be constructed or maintained and operated, the length 
of such road as near as may be, and the name of each county in 
this state through or into which it is made or intended to be 
made, the amount of the capital stock of the company, which 
shall not be less than five thousand dollars for every mile of road 
constructed or proposed to be constructed, and the number of 
shares of which the capital stock shall consist, and the names 



North Cabouna Corporation Code 307 

ud places of residence of bIx directors of the company, at least 
we of whom shall be a citizen and resident of this state, upon 
riom legal process may be served, who shall manage its affairs 
k the first year, or until others are chosen in their places. Each 
fobscriber to such articles of association shall subscribe thereto . 
kisname, place of residence, and the number of shares of stock he 
agrees to take in the company. On compliance with the provisions 
n! the succeeding section, such articles of association may be filed 
in tlie office of the secretary of , state, who shall indorse thereon 
(he day they are filed, and record the same in a book to be provid- 
ed by him for that purpose ; and thereupon the persons who have 
so subscribed such articles of association, and all persons who 
shall become stockholders in such company, shall be a corpora- 
tion by the name specified in such articles of association, and 
shall possess the powers and privileges granted to railroad cor- 
porations by this chapter. The articles of association of any com- 
pany formed under the provisions of this chapter, or the charter 
of any railroad company formed under a special act of the Gen 
eral Assembly, may be amended as provided in sections 1130 
and 1131 of said Consolidated Statutes (herein 52 and 53), and 
said sections 1130 and 1131 are hereby made to apply to railroad 
companies: Provided, no amendment may be made changing the 
nature of the company's business, extending its corporate exist- 
ence or authorizing any powers other than those anthoriKed by 
this chapter. 

C. S., 3420; Rev., a. 2548; Code, s. 1932; 1S71-2, c. 138; 1905, c. 187; 1907, 
t- 472, as. 1, 2; 1921, c. 117. 

H&flroadB §14. Artielen oC aasoi-intioii otnting the lengtli of the pro- 
posed road a.B 60 miles, and reportiiiu only $32,000.00 of Ktock aw subscribed, 
and «l,6OO.O0 paid in, are void on tlielr fnei'.— Kinstor 4 C. R. Co. v. Stroinl, 
132 N. C. 413, 43 S. E. 913. 

OorporatlonB §29. Where tlie artii-les of iiHsotiatlon of ;l railroad cor- 
poration SiTo on their face inoperative and void, the court may so declare 
Idem in a proceeding by the corporation to eondemn land. — Ibid. 

OoTporatloDB g 29. The act of Ihp Secretriry of State in filing ami ro- 
fording articles of assoeiatlon of a railroad company, when the nrticles Arc 
not Buch &a are required by law, is a nullity. — Ibid. 

666. Prerequisites of filing; stock subscription; affidavit of di- 
rectors; payment of fees. Such articles of association shall not 

be filed and recorded in the office of the secretary of state until 
at lea.st one thousand dollars of stock for every mile- of railroad 
proposed to be mad« is subscribed thereto, and five per cent paid 

DiclzedbyCoOglC 



308 North Carolina Corporation Code 

thereon in good faith, and in cash, to the directors named in the 
articles of association; nor until there is indorsed thereon or an- 
nexed thereto an affidavit made by at least three of the direct- 
ors named in such articles, that the amount of stock required by 
this section has been in good faith subscribed and five per cent 
paid in cash thereon as aforesaid, and that it is intended in good 
faith to construct or to maintain and operate the road mentioned 
in such articles of association, which affidavit shall be recorded 
with the articles of association, as aforesaid; nor until said di- 
rectors shall pay the taies and fees provided for under the chap- 
ter Corporations, Article 11, entitled Taxes and Pees, 

C. S., B. 3421; Ebv., b. 2549; Code, a. 1933; 1871-2, c. 138, b. 2; 1905, e. 16S. 

Oorporatioaa g 29. The act of the Secretary of State ia filing and record- 
ing articles of assoeiatiou of a railroad corporation, whea tba articles ar« 
not auch as are required by law, is a nullity, — Kinston & C. E. Co. v. 
8troud, 1S2 N. C. 413, 43 S. E. 913. 

' 667. Copy of articles evidenoe of incorporation. A copy of 
any articles of association 0ed and recorded in pursuance of this 
article and of the record thereof, with a copy of the affidavit 
aforesaid indorsed thereon or annexed thereto, and certified to 
be a copy by the secretary of state, shall be presumptive evidence 
of the incorporation of such company, and of the facts therein 
stated. 

C. S., B. 3422; B,e\., a. 2550; Code, b. 1934; 1871-2, e. 138, a, 3. 

See cases cited under section 5. 

668. Opening of subscription books. When such articles of 
association and affidavit are filed and recorded in the office of the 
secretary of state, the directors named in such articles of asso- 
ciation may, in case the whole of the capital stock is not before 
subscribed, open books of subscription to fill up the capital stock 
of the company in such places and after giving such notice as 
they may deem expedient, and may continue to receive subscrip- 
tions until the whole of the capital stock is subscribed. 

C. S., a. 3423; Eev., b. 3551; Code, b. 1935; 1871-2, c, 138, a. 4. 

669. How stock paid for; forfeiture for non-pajrnwnt. The di- 
rectors may require the subscribers to the capital stock of the 
company to pay the amounts by them respectively subscribed 
in such manner and in such installments as they may deem 
proper. If any stockholder shall neglect to pay any installment 
as required by a resolution of the board of directors, the said 
board shall be authorized to declare his stock and all previous 
payments thereon forfeited for the use of the company, but they 

DidilzedbyCoO^IC 



North Caeolina Corporation Code 309 

shall not declare it bo forfeited until they shall have caused a 
notice in writing to be served on him personally, or the same to 
be deposited in the postofKee, properly directed to him at the 
postofBee nearest his usual place of residence, stating that he is 
required to make such payment at the time and place speoified 
ID Huch notice, and that if he fails to make the same, his stock 
and all previous payments thereon will be forfeited for the use 
of the company, which notice shall be served as aforesaid at least 
sixty days previous to the day on which payment is required to 
be made. 



670. Increase of capital sto(^. In case the capital stock of any 
railroad company is found to be insufBcient for constructing and 
operating its road, such company may, with the concurrence of 
two-thirds in amount of all its stockholders, increase its capital 
stock from time to time to any amount required for the puT' 
poses aforesaid. Such increase must be sanctioned by a vote in 
person or by proxy of two-thirds in amount of all the stockhold- 
ers of the company, at a meeting of such stockholders called by 
the directors of the company for that purpose, by a notice in writ- 
ing to each stockholder, to be served on him personally or by de- 
positing the same, properly folded and directed to him at the 
postoffice nearest his usual place of residence, in the postoffice at 
least twenty days prior to such meeting. Such notice must state 
the time and place of the meeting and its object and the amount 
to which it is proposed to increase the capital stock. The pro- 
ceedings of such meeting must be entered on the minutes of the 
proceedings of the company, and thereupon the capital stock of 
the company may be increased to the amount sanctioned by a 
vote of two-thirds in amount of all the stockholders of the com- 
pany aforesaid. 

C. 8., 8. 3425; Bev., i. 3S5S; Code, b. 1939; 1871-2, c. 138, s. 9. 

671, Liaibility fysr unpaid stock to laborers ; notice to stock-' 
holder. Each stockholder of any such company shall be indi- 
vidually liable to the creditors of such company to an amount 
equal to the amount unpaid on the stock held by him, for all the 
debts and liabilities of such company until the whole amount of 
the capital stock so held by him shall have been paid to the com- 
pany, and all the stockholders of any such company shall be 
jointly and severally liable for the debts due or owing to any of 
its laborers and servants, other than contractors, for personal 

DiyilzcdbvCjOO^^IC 



310 North Cabouna Corporation Code 

services for thirty days' service performed for such company, but 
shall not be liable to an action therefor before an execntion shall 
be returned unsatisfied in whole or in part against the corpora- 
tion, and the amount due on such execution shall be the amoimt 
recoverable with costs against such stockholder. Before such 
laborer or servant shall charge such stockholders for such thirty 
days service he shall give them notice in writing within twenty 
days after the performance of such service that he intends to 
bold them liable, and shall commence such action therefor within 
thirty days after the return of such execution unsatisfied as above 
mentioned; and every such stockholder, against whom any such 
recovery by such laborer or servant shall have been had, shall 
have a right to recover the same of the other stockholders in 
such corporation in ratable proportion to the amount of the stock 
they shall respectively hold with himself. 

C. 8., 8. 3426; Rev., a. 2556; Code, s. 19-iO; 1871-2, c, 138, b. 10. 

672. Liability of tmstees' and other fldudaries holding stock. 
No person holding stock in any such company as executor, ad- 
ministrator, guardian or trustee, and no person holding such 
stock as collateral security, shall be personally subject to any 
liability as stockholder of such company. The estates in the 
hands of aueh executor, administrator, guardian or trustee shall 
be liable in like manner and to the same extent as the testator or 
intestate or the ward or person interested in such trust fund 
would have been if ho bad been living and competent to act and 
hold the same stock In his own name, ^nd a person pledging such 
stock shall be considered as holding the same, and shall be liable 
as a stockholder accordingly. 

C. S., B. 3427; Rev., b. 2557; Code, s. 1941; 1871-2, r. 1.18, a. 11, 

673. Diirectors and president. There shall be a board of six 

directors, one of whom shall be elected president, of every cor- 
poration formed under this article, to manage its affairs. The 
directors shall be chosen annually by a majority of the votes 
of the stockholders voting at such election, in such manner as 
may be prescribed in the by-laws of the corporation, and they 
may and shall continue in office until others are elected in their 
places. In the election of directors each stockholder shall be 
entitled to one vote personally or by proxy on every share held 
by him thirty days previous to any such election, and vacancies 
in the board of directors shall be filled in such manner as shall 
be prescribed by the by-laws of the corporation. The inspectora 
of the first election of directors shall be appointed by the board 

DiclzedbyCoOglC 



North Cabouna Corporation Code 311 

of directors named in the articles of association. No person shall 
be a director or president unless he shall be a stockholder owning 
slock absolutely in bis own right and qualified to vote for di- 
rectors at the election at which he shall be chosen; and at every 
election of directors the books and papers of such company shall 
be exhibited to the meeting, if a majority of the stockholders 
present shall require it, 
C. a., 8. 3128; Rev., a. 2552; Code, a. 1936; 1871-2, e, 138, a. 5, 

674. Appointment of officers and agents. The president and 
directors shall appoint a treasurer and secretary and such other 
officers and agents as shall be prescribed by the by-laws, 

C. a, B, 3439; Rev., s. 2553; Code, a. 1037; 1871-2, e, 138, b. 6. 

676. Officials to account to successors. The president and direc- 
tors of the several railroads, and alt persons acting under them, 
are hereby required upon demand to account with the president 
and directors elected or appointed to succeed them, and shall 
transfer to them forthwith all the money, books, papers, choses 
in action, property and effects of every kind and description be- 
longing to such company. 

C. S., B. 3430; Rev., s. 2648; Code, b. 2001; 1870-1, c. 72, bb. 1, 3. 

676. Failure of certain railroad officers to account with suc- 
cessors. If the president and directors of any railroad company, 
and any person acting under them, shall, upon demand, fall or 
refuse to account with the president and directors elected or 
appointed to succeed them, and to transfer to them forthwith 
all the money, books, papers, choses in action, property and 
effects of every kind and description belonging to such company, 
they shall be guilty of a felony, and shall be punished by im- 
prisonment in the state's prison for not less than one nor more 
than five years, and be fined at the discretion of the court. All 
persons conspiring with any such president, directors or their 
agent^ to defeat, delay or hinder the execution of this section 
shall be guilty of a misdemeanor, and shall be punished in like 
manner. The governor is hereby authorized, at the request of the 
president, directors and other officers of any railroad company, 
to make requisition upon the governor of any other state for the 
apprehension of any such president failing to comply with this 
section. 

C. 8., B. 4400; Eev., b. 3760; Code, m. 2001, 2002; 1870-1, c. 72, as. 1-3. 
Section haa reference only to money, choaea in action, property and effects 
belonging to the company. — Stnte v. Jonea, 67 N, C. 210, 

677. Counties may subscribe stock. The boards of commisBion'i , 



312 NoETH Carolina Coeporation Code 

era of the several counties shall have power to subscribe Btook 
to any railroad company when necessary to aid in the construc- 
tion of any railroad in which the citizens of the county may have 
an interest. 

C. S., 9. S431i Rev., B. 2558; Code, b. 1996; 1868-9, e. 171, s. 1. 

StatiiUs § IS. Constittitional requircmenta respecting the p&saage of 
acts allowing [bounties, etc., to issue bonds, are mandatory, and compliance 
therewith is essential to the validity of such acts. — Wittkowsky v. Board 
of Com'rs of Jackson County, 150 N. C. BO, 63 8. E. 275? 

Towns g S2. Bonds issued by a township to aid tbe construction of a 
railroad caunot be sustained under above section authorizing county com- 
miasioners to subscribe for railroad stock to aid in the completion of rail- 
• roads. — Ibid. 

ConntieB § 173. If county commisaioners ran subscribe for railroad stock 
to aid in completing a railroad, the power could not be exercised to fix a 
debt on one or more townships of the county, though the road ran through 
one township only. — Ibid. 

Towns g G2. Statute cannot b< 
bonds by a township in aid of a 
County Com'ra, 135 N. C. 49, 47 E 

OotmtlM g 173. Statute does not authorize county to order an election to 

determine whether bonds shall be issued to aid a railroad on which no 
work had been done when the election was ordered. — Commissioners of 
Buncombe County v. Payne, 123 N. C. 432, 31 S. E. 711. 

678. On dissolation or sale of Railroads purcbaaer becomes a, 
corporation. When any railroad corporation shall be dissolved 
or its property sold and conveyed under any execution, deed of 
trust, mortgage or other conveyance, the owner or purchaser shall 
constitute a new corporation upon compliance with law. 

C. 8., B. 3463; Rev., b. 2565; Code, s. 2005. 

OOTpOiatlous g 60S. In order that the sale of the franchise and property 
of a corporation under mortgage shall have the effect of a dissolution of 
such corporation as provided in Section 697 of the Code (herein 153), an- 
other corporation must be provided to take its place, and assume and dia* 
charge the obligations to the public growing out of the grant of the fran- 
chise, and until that is done the old corporation continues to exist and when 
it is done the new corporation will be a domeatio corporation. — Jaines v. 
Western North Carolina B. Co., 121 N. C. 523, 28 8. E. 537. 

(In this connection see the case of Julian, Sheriff, and James, Adminis- 
tratrix, v. Central Trust Co., and Southern Bailway Co., cited under Section 
153.) 

670. Roads not to be established unless aatborued by law. If 
any person or corporation, not being expressly authorized thereto, 
shall make or establish any caual, turnpike, tramroad, railroad or 
planb-road, with the intent that the same shall be used to trans- 
port passengers other than such persons, or the members of such 
corporation, or to transport any productions, fabrics or manu- 



North Cakolina Corporation Code 313 

faetores other than their own, the person or corporation so 
offending, and using the same for any such purpose, shall forfeit 
and pay fifty dollars for every person and article of produce so 
transported. 

This section shall not apply to any narrow-gauge railroad, 
tramroad or toll road made and established and maintained 
solely by the owner of the lands upon which said road may be, 
the priocipal business of which is the transportation of logs, 
lumber and articles for the owners of such railroad or tramroad : 
Provided, that the corporation commission shall have power to 
anthorize lumber companies, having logging roads, to transport 
all kinds of commodities other than their own and passengers 
and to charge therefor reasonable rates to be approved by said 
commission. 

C. a, a. 3418; Bev., b. 2688; Code, 8. 1717; R. C, e. 81, i. 37; 1874-5, c. 
83; 1901, e. 282; 1907, e. 531; 1911, c. 160; 1915, c. 8. 

OoTpor&Uolu §487. Where standing timber was conveyed to a corpora- 
tion at B, reduced price in consi deration of its covenant to build a railroad. 
which it repudiated on the ground that it was ultra vires, the grantor 
eaal^ recover the difference between the contract price and the actual value 
of the timber.— Herring v. Wallace Lumber Company, 163 N. C. 481, 79 S. E. 
876; Herring v. Cumberland Lumber Company, 1S9 N. C. 382, 74 S. E. 1011. 

680. Actions for penalties to be tn name of state. All penalties 
imposed by this chapter may, unless otherwise provided, be sued 
for in the name of the state. 

C. 8., B. 3415; Rev., b. 2647; Code, i. 1976; 1885, c. 221. 
See Harmon v. PerguBon Contracting Company, 159 N, C, 22, 74 S. E. 
832; Bobertson v Atlantic Coait Line Railroad Co., 148 N. C. 323, 62 8. S- 



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CHAPTER XI. 

INSURANCE. 
Snbcliaptai One. Insiuance Department. 
ART. 1. TITLE AND DEFINITIONS, 

Section 

Terms defined 681 

Coatraet of insnrani^e 632 

ABT. 2. TJNDEB 8DPEKVT8ION OP INSURANCE COMMISSIONER. 

Antliorit; over all inBurani^e companies; no exemptions from license 683 

Examinat'ioi'B to be made 6'S4 

Oath required for campliance with law 68S 

luveBtigation of charges 686 

Collection of expenses of examination 6ST 

CommisBioner to prescribe forms and furnish blanks for retarus 688 

Annual statements to b'e filed with commissioner 689 

Punishment for making false statement . 690 

Commissioner to examine statements and publish abstracts .... 691 

ABT. 3. GENERAL REGULATIONS FOR INSURANCE. 

State law governs insurance contracts 692 

No insnraaee contracts except under this chapter 693 

Statements in applications not warranties 6M 

Stipulation as to jurisdiction and limitation of actions 695 

Insurance as security for a loan by the company 696 

Companies must do business in own name 697 

Publication of assets and liabilities! penalty for failure 693 

Liabilities and reserve fund determined 699 

Revocation of license of foreigi^ company 700 

Bevocatiou of license of domestic company; injunction and receiver Tdl 

Bevoeatiou of license for violation of law or impaired assets . . . 70S 

Agents and adjusters must procure license 703 

Application for license 704 

Power of commissioner to revoke license 705 

Nonresident agents forbidden; exception 706 

ART. 4. DEPOSIT OF SECURITIES. 

Deposit held in trust by commissioner or treasurer 707 

Deposits subject to apprAral and control of commissioner .... 708 

Deposits by foreign companies required and regulated 709 

Deposits by life companies not chartered in United States .... 710 
Deposits by foreifjn fire insurance companies; amount and nature of 

deposit required 711 

ART. 5. LICENSE FEES AND TAXES. 

Schedule of license fees, taxes, and charges 712 

No additional charge by counties or towns 713 

License fees from more than one class of insurance 714 

Licenses run from April first; pro rata payment 715 

Statements of gross receipts filed and tax paid 716 

Policyholders to furnish information 71T 



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North Carolina Corpobation Code 315 

' 8abc)iapt«r Two. Insnniiica OompuilM. 

AST. 6. GENERAL DOMESTIC COMPANIES. 

SectioD 

Application of this chapter and general laws T18 

Extension of existing charters TIE* 

Certificate required before issuing policies 720 

Fnrposes of organization 721 

Manner of creating such corporations TS2 

i^rst meeting; organization; license 733 

By-laws; classification and election of directors 724 

Power to purchase, hold and convey real estate 725 

Amount of capital required 726 

Capital stock full; paid in cash 737 

Inveatmenl «f capital" 728 

Antboritj' to increase or reduce capital stoclc 729 

Aseessment of shares; revocation of license 730 

Increase of capital stork 731 

Reduction of capital stock 732 

Dividends declared; liability of stockboldera for UD^wful dividends 733 

Loans insufficiently secured 734 

ART. 7. GUARANTY FUND FOR DOMESTIC COMPANIES. 

Guaranty fund established 735 

Separate aeconnts; application of fund '736 

Reduction or retirement of fund 737 

Insolvency; return of fund 738 

Conversion to guaranty fund 73B 

ART. 8. MUTUAL INSURANCE COMPANIES. 

Mutual fire insurance companies organized; requisites for doing busi- 
ness 7*0 

Assessments kept in treasury; certain officers debarred from commis- 
sions ....'. 741 

Policyholders are members of mutual fire companies 742 

Directors in mutual fire companies 743 

Mutual fire companies with a guaranty capital 744 

Dividends and assessments; liability of policyholders 745 

Mutual and assessment companies and their liability 746 

Guaranty against assessments proliibited 747 

Manner of making assessments; rights and liabilities of policyholders 748 

Mutual life and health companies 749 

Dividends on, and redemption of, guaranty capital of life companies 750 

ART. 9. ASSESSMENT COMPANIES. 

Copies of charter and by-laws filed 751 

Contracts must accord with charter and by-laws 752 

"Assessment Plan" printed on application and policy 753 

Revocation for noncompliance 754 

Deposits and advance assessments required 755 

Deposits by foreign assessment companies or order 756 

■Revocation of license ., (■^(•loTffp 



316 NoBTH Carolina Cobpobation Code 

ABT. 10. BOND and INVESTMENT COMPANIES. 

"Bliia Sk7 I.aw." 

Section 

License required; amouot of capital stock 758 

Foreign companies subject to regulation of this article 759 

Documents to ba tiled with commisBioner; license issued TOO 

Advertising matter regulated 761 

Contract in writing; stipulations required 762 

Fundi deposited until license granted 763 

Name of person interested" to appear in contract 7ft4 

Examination hy commissi oner; license 7S3 

Changes in organization or plans filed with commissioner .... 766 

Agents must be licensed; bond required 767 

Statements filed; accounts kept 768 

BevocatiOD of license • 769 

Punishment for violation 770 

ABT. 11. FIDELITY INSURANCE COMPANIES. 

May act as fiduciaries 771 

License to do business 772 

Examination as to solvency 773 

Certificate of solvency equivalent to justification 774 

Clerk of superior court notiBsd of license and revocation .... 7T5 

Resident agents required 776 

Limitation of liability assumed 77? 

AET. 12. PROMOTING AND HOLDING COMPANIES. 

Terms defined , 778 

Certifleate required ' 77» 

Application for certificate by agent 780 

Application for certificate by corporation 781 

Approval of advertising matter; misrepresentation 782 

ABT. 13. RATE-MAKING COMPANIES. 

Information to be filed with insurance commissioner , 783 

Examination by insurance commissioner; reports 784 

Schedule of rates filed 785 

Certain conditions forbidden; no discrimination 786 

Record to be kept; hearing on rates 787 

Hearing on rates before insurance commissioner 788 

Certain insurance contracts excepted . . . . ' 789 

ART. 14. EEAL-ESTATE TITLE INSURANCE COMPANIES. 

Purposes of organization 790 

Certificate of authority to do business 781 

Annual statement and license required 792 

ABT. 15. FOREIGN INSURANCE COMPANIES. 

Admitted to do business 793 

Condition of admission . . 794 

Limitation as to classes of business 795 

Reciprocal laws 796 

Service of legal process upon insurance commissioner 797 

Duty of commissioner nhen served with process 798 

Action to enforce compliance with this chapter . -T \>(lo{i' ^^'^ 



NOBTH CAKOLIMA COBPOBATIOM CODE 317 

ABT. 16. BEGULATION OF LIFE INSURANCE COMPANIES, ■ 

Sertion 

Life insurance company defined; requisites of contract SOD 

Foreign companies; requirements for admission SDl 

Soliciting agent represents the company S02 

SniKh&ptar nirse. Fiatemal OnUn and Societlu. 
AKT. 17. FRATERNAL OKDEBS. 

Qeneral insurance la# not applicable 803 

Fraternal orders defined 804 

Funds derived from asBessments and dues SOS 

Assessments and dues; collectiou 806 

Ueetings of governing body; principal oflSce; separation of races . 807 

Conditions precedent to doing business SOS 

Certain lodge systems exempt 809 

AHT. 18. FBATEBNAL BENEFIT SOCIETIES. 

Fraternal benefit society defined 810 

Lodge system defined Sll 

Bepresentativi) foiin of government defined 812 

Organization 813 

Constitution and by-laws 814 

Amendment to constitution and by-laws 815 

Waiver of the provisions of the laws 816 

Place of meeting; location of office 817 

No personal liability or benefits SIS 

Qualifications for membership 819 

Benefits 820 

Beneficiaries 821 

Benefit certificates 622 

Benefits not subject to debts 823 

Funds provided 824 

Investment of funds S2S 

AppUcation of funds 826 

Powers of existing societies retained; reincorpo ration 827 

Uergers and transfers 828 

' Annual license 829 

Accident societies may be licensed 830 

Certain soeicties not included 831 

Reports to insurance commissioner 332 

Additional or increased rates 333 

Provisions to insure future security S34 

Valuation on Bcoumulation basis; tabular basis 835 

Examination of domestic societies 836 

Proceedings for dissolution 837 

Proceedings ouly by attorney -general 838 

Examination of foreign societies 839 

No adverse publications 840 

' Bevocation of liceuse 841 

Criminal ofFenscs S42 

Consolidation, merger, or reinsurance of risks 843 

ART. 19. GENERAL PROVISIONS FOR SOCIETIES. 

Appointment of trustees to hold property 844 

This chapter contains the statutes relating to the organization of insur- 
ance companies and the conditions precedent for doing business. vX)^Ic 



318 NoHTH Carolina Cobporation Code 

SUBCHAPTER I. INSUBANCE DEPARTMENT. 

ART. 1. TITLE AND DEFINITIONS. 

681. TeniiB defined. When coDsistent with the context and not 
obviously used in a different sense, the tenn "company" or 
"insurance company," as used in this chapter, includes all cor- 
porations, associations, partnerships, or individuals engaged as 
principals in the business of insurance; the word "domestic" 
designates those companies incorporated or formed, and "with 
home office, in this state; and the word "foreign," when used 
without limitation, includes all those formed by authority of any 
other state or government, and whose home office is not located 
in this state. 

C. 8., B. 6261; Kev., a. 467S; 1899, c. 54, «. 1. 

Our statutes relating to the regalation asd supervision of insurance com- 
panies by tbe insurance commissioner use ttie words insnrance companies, 
associrttions, and ordera, and clearlv contemplates both incorporated and 
unincorporated companies.— State v.'Arlington, 157 N. C. 640, 73 S. E. 122. 

682. Contract of insurance. A contract of insurance is an 
agreement by which one party for a consideration promises to 
pay money or its equivalent or to do some act of value to the 
insured upon, and as an indemnity for, the destruction, loss, 
or injury of something in which the other party has an interest. 

C. 8., a. 6262; Rev., s. 4679; 1889, e. 64, a. 8. 

ART. 2. UNDER SUPERVISION OF INSURANCE 
COMMISSIONER. 

683. Authorit; over all insurance companies; no exempttons 
from license. Every insurance company, association or order, 
as well as every bond, investment, dividend, guarantee, registry, 
title guarantee, debenture, or such other like company (not 
strictly an insurance company, as defined in the general insurance 
laws), must be licensed and supervised by the insurance commis- 
sioner, and must pay all licenses, taxes, and fees as prescribed in ' 
the insurance laws of the state for the class of company, associa- 
tion, or order to which it belongs. No provision in any statute, 
public or private, may relieve any company, association, or order 
from the supervision prescribed for the class of companies, asso- 
ciations, or orders of like character, or release it from the pay- 



North Carouna Coeporation Code 319 

ment of the licenses, taxes, and fees prescribed for companies, 
associations, and orders of the same class; and all such special 
provisions or exemptions are hereby repealed. It is unlawful 
for the insurance commissioner to grant or issue a license to any 
company, association, or order, or agent for them, claiming such 
exemption from supervision by his department and release for 
the payment of license, fees, and taxes. 

C. 8., H. 6274; Rev., i. 4691; 190S, c. 594, sb. 1, 2, 3. 

State V. Arlington, 157 N, C. 840, 73 8. E. 122. 

684. Examinations to be made. Before granting certificates 
of authority to an insurance company to issue policies or make 
contracts of insurance the commissioner shall be satisfied, by such 
examination and evidence as he sees fit to make and require, 
that the company is otherwise duly qualified under the laws 
of the state to transact business therein. As often as once in three 
years he shall personally or by his deputy visit each domestic 
insurance company and thoroughly inspect and examine its 
affairs, especially ae to its financial condition and ability to ful- 
fill its obligations and whether it has complied with the laws. 
He shall also make an examination of any such company when- 
ever he deems it prudent to do so, or upon the request of five or 
more of the stockholders, creditors, policyholders, or persons 
pecuniarily interested therein, who shall make afiSdavit of their 
belief, with specifications of their reasons therefor, that the com- 
pany is in an unsound condition. Whenever the commissioner 
deems it prudent for the protection of policyholders in this state 
he shall in like manner visit and examine, or jiaase to be visited 
and examined by some competent person appointed by him for 
that purpose, any foreign insurance company applying for ad- 
mission or already admitted to do business in this state, and such 
company shall pay the proper charges incurred in this examina- 
tion, including the expenses of the commissioner or his deputy 
and the expenses and compensation of his assistants employed 
therein. For these purposes the commissioner or his deputy or 
persons making the examination shall have free access to all the 
books and papers of the insurance company that relate to its 
butriness, and to the books and papers kept by any of its agents, 
and may Bommon, administer oaths to, and examine as witnesses, 
•he directors, oflicers, agents, and trusteeo of any such company, 
and any other persons, in relation to its affairs, transactions, 
and condition. 

C. S., 8. 6276; Rev., e. 4692; 1899, o. 54, ■. 18. 

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320 North Carolina Corporation Code 

68B. Oath required for cmi^liance with law. Before issuing 
license to any insurance company to transact the busineBS of in- 
surance in this state, the insurance commiasioner shall require, 
in every case, in addition to the other requirements provided for 
hy law, that the company file with him the affidavit of its presi- 
dent or other chief officer that it has not violated any of the pro- 
visions of this chapter for the space of twelve months last past, 
and that it accepts the terms and obligations of this chapter as a 
part of the consideration of the license. 

C. a., B. 6276; Bev., b. 4693; 1S99, c. S4, b. 110; 1901, c. 391, h. 8. 

686. Investigation of charges. Upon complaint being filed by 
a citizen of this state that a company authorized to do business 
in the state has violated any of the provisions of this chapter, 
the insurance commissioner shall diligently investigate the mat- 
ter, and, if necessary, examine, under oath, by himself or his 
accredited representative, at the head office located in the United 
States, the president and such other officer or agents of such 
companies as may be deemed proper; also all books, records and 
papers of the same. He or his deputies shall have power to 
summon witnesses and to compel them to appear before him, 
or either of them, and to testify under oath in relation to any 
matter, which is by the provision of this act, a subject of inquiry 
and investigation, and may require the production of any book. 
paper, document or other matter whatsoever deemed pertinent 
or necessary to such inquiry with the same force and effect as 
is possessed by courts of record in this state. 

For the purposeof carrying out the provisions of this act the 
insurance commissioner is authorized to employ a competent per- 
son or persons to make such investigations, and to provide for 
such expenses, including compensation of deputies, as may be in- 
curred in said investigations, the sum of five thousand dollars 
($5,000) is hereby annually appropriated. 

C. 8., 8. 6277; Bev., b. 4694; 1899, c. 54, s. Ill; 1003, c. 438, a. 11; 1921. 
e. 136, s. 4. 

687. Collection of expenses of examination. If any company, 
authorized to do business in this state under this chapter, fails 
or refuses to pay the expenses of examination upon the presenta- 
tion of a bill therefor by the insurance commissioner, the com- 
missioner shall at once institute appropriate action against the 
company for the recovery of the same. 

C. 8., B. 6278; Rev., s. 469G; 1899, <r. 54, ■. 113. 

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N<»TH Carolima Cobporation Codb 321 

688. Oommiasioiia' to presoritw form and fnnuBh blanks for 

retttms. It is the duty of the insurance commissiouer to furnish 
blank forms for statements, which forms may be changed by him 
from time to time when necessary to secure full information as 
to standing, condition, and such other information desired of 
companies tinder his department. The following, or such other 
forms as he prescribes, shall be used : 

1- Rehirn of stock companies, other than life companies. 

1. State the name of company. 2. Where located. 3. When 
incorporated, and for what period, 4, Amount of capital. 
5. Amount of capital actually paid in. 6. Cash value of real 
estate owned. 7. Amount loaned on mortgage on real estate. 
8. Amount and description of each hind of bonds and stocks 
owned, with par and market value. 9. Amount loaned on collat- 
eral, with par and market value of each security pledged. 
10. Amount of cash on hand. 11. Amount of gross premiums in 
course of collection. 12. Amount of bills receivable, not matured, 
taken for premiums. 13. Amount of all other property or in- 
vestments. 14. All outstanding losses. 15. Amount of unearned 
premiums on policies in force. 16. All other liabilities and claims 
against the company. 17. Amount of cash received for premiums. 
18. Amount of notes received for premiums. 19. Amount re- 
•ceived for interest and rents. 20, Amount of income received 
from all other sources, 21. Amount paid for losses. 22. Amount 
paid for dividends. 23. Amount paid for expenses. 24. All 
other expenditures. 25. Amount of risks written, terminated, 
and in force with gross premiums thereon. 

2. Return of niutti/il coiiipanicit, other than life. 

1. Stj^te the name of company, 2, Where located. 3. When 
incorporated, and for what period. 4. Amount of guaranteed 
capital, if any. 5. Cash value of real estate owned. 6. Amount 
loaned on mortgage of real estate. 7. Amount and description 
of each kind of stocks and bonds owned, with par and market 
value. 8. Loans, on collateral, with par and market value of each 
security pledged. 9. Cash in oflBce and in bank. 10. Gro^ pre- 
miums in course of collection. 11. All other loans, investments, 
and property. 12. Premium notes liable to assessment, 13. 
Amount of scrip outstanding, 14. All outstanding losses. 15. Un- 
earned premiums. 16. Bividenda declared and unpaid. 17. JBor- 

D,:|,lz.db.CA>03lC 



322 North Cabolina Cobpobation Code 

rowed moDey. 18. All other liabilities and claima against the 
company. 19. Cash received for premiums. 20. Cash received 
for interest and rent. 21. Premium notes received. 22, Income 
from all other sources. 23. Amount paid for losses. 24. Amoont 
paid for expenses. 25. Surplus returned to policyholders. 26. All 
other expenditures. 27. Scrip dividends declared. 28. Amomit 
of risks written, terminated, and in force, with gross premiumB 
thereon. 

3. lielum of life itisuran-ce companies. 

1. The name of the company. 2. Where located. 3. When in- 
corporated, and for what period. 4. Amount of capital stock or 
guaranteed fund. 5. Cash value of real estate owned. 6. Amouot 
loaned on mortgages of real estate. 7. Amount and description of 
each kind of bonds and stocks owned, with their par and market 
value. 8. Loans on collateral, with par and market value of each 
security pledged. 9. Cash in hank and in office. 10. Premium notes 
and loans on policies in force. 11. Outstanding and deferred pre- 
miums on policies in force. 12. All other loans, investments, and 
property. 13. All outstanding losses and policy claims. 14. Divi- 
dends of surplus due policyholders. 15, Forfeitures and surplus 
accrued, held for and to be divided to any special class of policy- 
holders; surplus accrued in policies in force not yet distributed. 
16. All other liabilities and claims against the company. 17. Cash 
received for premiums, 18. Cash received for interest and rents. 
19. Income from all other sources. 20. Amount paid for 
losses and claims. 21, Dividends of surplus to policyholders. 
22. Amount paid for expenses. 23. All other expenditures. 
24. Number, date, amount, and kind of each outstanding policy 
not heretofore returned, gross premium thereon, and age of the 
insured. 25. Number, date, and amount of each policy, which 
has within the year ceased to be in force, now terminated, what 
has been paid to the legal holder of the policy, and the age_ 
of the insured. 

C. S., a. 6279; Hev., s. 4708; 1899, e. ^4. s, 104. 

689. Annual atatements to be filed with commissioner. Every 
insurance company, association, or order — domestic, through its 
officers, and foreign, through its general agent — shall file in the 
office of the insurance commissioner, on or before the first day 
of March in each year, in form and detail as the insurance com- 

DiclzedbyCoO^IC 



NoETH Cakolina Cobpoeation Code 323 

missioner prescribes, a statement showing the business standing 
and financial condition of such company, association, or order 
on the preceding thirty-first day of December, signed and sworn 
to by the chief managing agent or officer thereof, before the in- 
snrance commissioner or some officer authorized by law to ad- 
minister oaths. The insurance commissioner shall, in December 
of each year, furnish to each of the insurance companies author- 
ized to do business in the state two or more blanks adapted for 
their annual statements, 

C. 8.. B. 6280; Bev., s. 4398: 1899, c. 54, is. 72, 73, 83, 97, 90: 1901, c. 706, 
B. 2; 1903, c. 43S, s. 9. 

690. Pnnishment for making false statement. If any insurance 
company in its annual or other statement required by law shall 
wilfully misstate the facts, the insurance company and the per- 
son making oath to or subscribing the same shall severally be 
pimished by a fine of not less than five hundred nor more than 
one thousand dollars. 

C. 8., s. 6381; Kev., a. 3493; 1899, e. 5-1, 8. 97. 

691. OommiBsioner to examine statements and pnblish abstracts. 
It is the duty of the insurance commissioner to receive and 
thoroughly examine each annual statement required by this 
chapter, and, if made in compliance with the laws of this state, 
to publish, at the expense of the company, an abstract of the 
same in one of the newspapers of the state, which newspaper may 
be selected by the general agent making the statement, if within 
thirty days after the filing of the statement he notifies the insur- 
ance commissioner, in writing, of the name of the paper selected 
by him, 

C. 8., i. 6282; Bev., s. 4699; 1899, c. 54, s. 74; 1901, c. 391, 9. 6. 

ART. 3. GENERAL REGULATIONS FOB INSURANCE. 

692. State law governs insurance contracts. All contracts of 
insurance on property, lives, or interests in this state shall be 
deemed to be made therein; and all contracts of insurance the 
applications for which are taken within the state shall be deemed 
to have been made within this state and are subject to the laws 
thereof. 

C. 8., 8. 6287; Bev., b. 4806; 1899, c. 54, a. 2; 1901, e. 705, a. I. 

3Cilni«iica §712. A ceitifieate in a mutaal benefit aaaoeiation iraued to a 
eitizen of North Carolina is deemed to have been made within the state 
and sabjeet to its laws. — Williams v. Sapreme Conclave Improved Order of 
HeptaaophB, 172 N. C. 787, 90 S. E. 888. DnizcdbCoO'^lc 



324 NOBTH CASOLINA COBFORATION CODE 

iDBUiauce §712. A contract between a foreign mutual benefit associatioa 
and & membei taking out h policy through a domeatic lodge ia a North 
Carolina contract governed hj the North Carolina statutes in force when 
he became a membeT. — Wilson v. Supreme Conclave Improved Order of 

Heptaaopha, 174 N. C. 628, 94 8. E. 443. 

InSDisnca §712. A provision in a contract of insurance that, "This con- 
tract shall be governed hj, subject to and construed only according to the 
laws of the State of New York, the place of thia contract being expressly 
agreed to be the home office of said association in the city of New York," 
ia void BO far as the courts of this state are concerned. — Blackwell v. Mu- 
tual Eeaerve Fund Life Aaa'n, 141 N. C. 117, 53 S. E. 8S3. 

1 Cottingham v. Maryland Motor Car Ina. Co., 168 

693. No insurance contracts except under this cluster. Tt ia 
unlawful for any company to make any contract of insurance 
upon or concerning any property or interest or lives in this 
state, or with any resident thereof, or for any person as insurance 
agent or insurance broker to make, negotiate, solicit, or in any 
manner aid in the transaction of such insurance, unless and except 
as authorized under the provisions of this chapter. 

C. 8., s. 6288; Rev., s. 4807; 1899, c. 54, a. 2. 

694. Statements in application not warranties. All statements 
or descriptions in any application for a policy of insurance, or in 
the policy itself, shall be deemed representations and not war- 
ranties, and a representation, unless material or fraudulent, will 
not prevent a recovery on the policy. 

C. S., B. 62SS; Bev., a. 4808; 1901, c. 705, s. 2. 

Insnriuice g§687, 723. Section ia applicable to eertlfleate of fraternal 
benefit association incorporated under tibe laws of another state, providing 
for 'death benefits in exceas of $300.00.— Gay v. Woodmen of the "Worli 
179 N. C. 210, 102 S. E. 195. 

Insurance g 668. Whether the hernia which insured had when he stated 
be was in sound condition waa of such nature aa to render him unsound ia a 
question of fact for the jury. — Htnes v. New England Casualty Co., 172 
N. C. 225, 90 S. E. 131. j 

Insnianca g 830. Under a policy of inanrance prohibiting incumbrances ' 
or changea in title or interest, a chattel mortgage held merely to suspend ! 
the insurance, which, therefore, revived upon payment and cancellatjoa of 
the mortgage .—Cottingham v, Maryland Motor Car Ina. Co., 168 N. C. 
259, 84 S. E. 274. 

Insniauee §292. Where an applicant for life insurance stated he had not 
consulted a phyaiclan for two years preceding the application, but the evi- 
dence showed that be had been under treatment of several [diysieians dur- 
ing those two yeara, auch misrepresentation was material, and avoids the 
poliev. — Schas v. Equitable Life Assur. Society, 166 N. G. G5, SI 8. E. 1014; 
Bryant v. Metropolitan Life Ins. Co., 147 N.' C. 181, 60 " " 



NoBTH Carolina Coepobation Code 325 

Hastar b Servant §78. Contract of memberBhip in a railroad com- 
panf 's relief department held not a contract of insurance within this sec- 
tion; and a knowingly false statement did not defeat a recovery unless 
made to deceive and fraudulently mislead the company. — Daughtridge v. 
Atlantic Coast Line B. Co., 165 N. C. 18S, SO S. E. lOSO. 

Inanxance §299. Where an applicant for insurance falsely stated that 
within a year he had not been intimately associated with any one'aufTer- 
ing from a transmissible disease, such misrepresentation avoiding the pol- 
icy, unless the insurer waived the same with full knowledge of the facts. — 
Gardner v. North State Itfut. Life Ins. C!o., 163 N. C. 3!6T, 79 8. E. S06. 



a § 300. A misrepresentation by an applicant for life insurance 
that he had never been examined for insurance and rejected is material, 
and, if false, avoids the policy. — Hardy v. Phoenix Hut. Life Ins. Co., 167 
N. C. 569, 83 8. B. 801. 

Itunrance 6291. A statement in an application for life insurance that 
applicant had never had any disease of the kidneys is a material represen- 
tation; and the untruth of which is a defense to the policy, irrespective 
of fraud.— Alexander v. Metropolitan Life Ins. Co., 150 N. C. 536, 64 
B. E. 432. 

69B. Stipulations as to jurisdiction and limitation of actlonB. 
No company or order, domestic or foreign, authorized to do buei- 
ness in this state under this chapter, may make any conditioo or 
stipulation in its insurance contracts concerning the court or 
jurisdiction wherein any suit or action thereon may be brought, 
nor may it limit the time within which such suit or action may be 
commenced to less than one year after the cause of action accrues 
or to less than six months from any time at which a plaintiff 
takes a nonsuit to an action begun within the legal time. All 
conditions and stipulations forbidden by this section are void. 

C. S., s. 6290; Bev., s. 4S09; 1899, c. 54, ss. 23, 106; 1901, e. 301, s. S. 

Inanrance g622. The provision that no company or order shall make 
any conditions in its insurance contract limiting the time within which 
suit may be brought to less than one year, is in furtherance of police power 
of the state, and alt contracts covered by its terms are subject to its pro- 
visions, and are in ne way modified or affected by the provision in a bond 
that obligations of surety shall be construed strictly as one of suretyship 
only.— Guilford Lumber Mfg. Co. v. Johnson, 177 N. C. 44, 97 8. E. 732. 

Insnrance §622. The provision of a fire policy requiring action within 18 
months after the fire is reasonable and valid. — Holly v. London Assur. 

Corporation, 170 N. C. 4, 86 8. E. 694. 

Insurance g 812. Benefit society laws limiting the bringing of actions on 
eertificates to one year from accruing of action is valid. — Faulk v. Frater- 
nal Mystic Circle, 171 N. C. 301, 88 S. E. 431. 

Inanrance g 622. Where indemnity bond limited time for actions to 
6 months after time for filing elsim, and gave the employee thirty daya 
in which to make good any loss, it. is held that the employer could sue 
within one year and thirty davs after the discovery of a default. — Dixie 
Pire loB. Co. v. American Bonding Co., 162 N. C. 385, 78 8. E. 430. ^^(>Qo[c 



326 North Carolina Corporation Code 

Insnrancfl g 622. The provision that no iaaurance company shall limit the 
time in which suit Bhall be brought on a policy to lesB than one year, a 
BtipulatioQ in an accident policy that no legal procecdiugB shall be brought 
to recover any sum hereby insured within ninety days after receipts of 
proof, nor at all unless commenced within one year after date of alleged 
accident, will be eonstrued to give an assured 12 months after his right of 
action accrued, which would be a year after time for filing proof of loss, 
plus 90 days.— Heilig v. Aetna Life Ina. Co., 152 N. C. 358, 67 S. E. 937. 

Insurance §622. Under an accident policy stipulating that an action 
must be brought within one year after the right of action acerned, infancy 
does not stop limitations, since, by suing on the contract, the intnnt 
affirms it, and therefore is bound by its terms. — Ibid. 

696. Insurance as security for a loan by the company. Where 
an insurauce company, as a condition for a loan by such company, 
of money upon mortgage or other security, requires that the 
borrower insure either his life or that of another, or his property, 
or the title to his property, with the company, and assign or 
cause to be assigned to it a policy o£ insurance as security for the 
loan, and agree to pay premiums thereon during the continuance 
of the loan, whether the premium is paid annually, semiannually, 
quarterly, or monthly, such premiums shall not be considered 
as interest on such loans, nor will any loan be rendered usurious 
by reason of any such requirements, where the rate o£ interest 
charged for the loan does not exceed the legal rate and where the 
premiums charged for the insurance do not exceed the premiums 
charged to other persons for similar policies who do not obtain 
loans. 



687. Oompanies must do business in own name. Every in- 
surance company, foreign or domestic, must conduct its business 
in the state in, and the policies and contracts of insurance issued 
by it shall be beaded or entitled only by, its proper or corporate 
name. 

C. S., e. 6292; Rev,, a. 4811; 1899, c. 54, s. 18. 

698. Publication of assets and liabilities; penal^ for failure. 
When any company publishes its assets it must in the same con- 
nection and with equal conspicuousness publish its liabilities com- 
puted on the basis allowed for its annual statements; and any 
publications purporting to show its capital must exhibit only the 
amount of such capital as has been actually paid in cash. Any 
company or agent thereof violating the provisions of this section 
shall he punished by a fine of not less than fifty nor more than 
two hundred dollars. 

C. a, s 6293; Bev., ss. 3492, 4812; 1899, c. 64, so. '8, 96.(^~qqo[^j 



North Cabolima Cobfoeatiom Code 327 

689. ZJalnlities and reserre ftind detormiiifld. To determine 
the liability of an insurance company, other than life and real 
estate title insurance, upon its contracts, and thence the amount 
sncb company must hold as a reserve for reinsurance, the in- 
sarance commissioner shall take the actual unearned portion of 
the premiums written in its policies. In case of the insolvency 
of any company, the reserve on outstanding policies may, with 
the consent of the commisaioDer, be used for the reinsurance of its 
policies to the extent of tbeir pro rata part thereof. 

C. a, s. 6294; Eev., b. 4704; 1899, c. 54, a. 67; 1901, c. 391, a. 5; 1907, 
c. 1000, a. 4. 

700. Berocation of license of foreign company; pnblication of 
notice. If the insurance commissioner is of the opinion, upon 
examination or other evidence, that a foreign insurance company 
is io an unsound condition, or, if a life insurance company, that its 
actual funds, exclusive of its capital, are less than its liabilities; 
or that it has failed to comply with the law, or if it, its officers or 
agents, refuse to submit to examination or to perform any legal 
obligation in relation thereto, or if any foreign insurance com- 
pany applies to have removed from the superior court of any 
county of this state to the United States circuit or district court 
any action instituted against it, or institutes any action at law or 
suit in equity in a United States court against any citizen of this 
state, growing out of or in any way connected with any policy of 
insurance issued by such insurance company, he shall revoke or 
suspend all certificates of authority granted to it or its agents, 
and shall cause' notiiications thereof to be published in one or 
more newspapers published in this state; and no new business 
may thereafter be done by it or its agents in this state while such 
default or disability continues, or until its authority to do busi- 
ness is restored by the commissioner. 

C. a, B. 6295; Rev,, b. 4701; 1899, c. 54, h. 14; 1901, c. 176, a. 1. 

Insmance |20. The Inaurance ConimiBBiDner is not authorized to revoks 
the license of a foreign inaurance eompaay applying loi a. removal to the 
Federal Court of a auit brought againat it by a former agent for acrvit^ea. 
— Pacific Mut. Ina. Co, v. luBuranee Department, 144 N. C. 442, 57 S. E. 120. 

Const. lAW % 307. A state statute providing that the license of a foreign 
corporation shall be revoked for removing cases to the federal court ia in 
violation of the United Statea Constitution and is therefore void. — Terral, 
Secretary of State of Arkanaas, v. Burke Construction Co,, 42 S. Ct. 188, 

701. Revocation of license of domestic company; injunction and 
receiver. If, upon examination, the insurance commissioner is 
of the opinion that any domestic insurance company is insolvent, , 



828 NoKTH Carolina Corpobation Cora 

or bos exceeded its powers, or failed to comply with any provision 
of law, or that its condition is such as to render its further pro- 
ceeding hazardous to the public or to its policyholders, be ^lall 
revoke its license, and, if he deems it necessary, shall apply to 
a judge of the superior court to issue an injunction reatraininf 
it in whole or in part from further proceeding with its buBiiiess. 
The judge may issue the injunction forthwith, or upon notice aod 
hearing thereon, and after a full hearing of the matter may dis- 
solve or modify the injunction or make it permanent, and raaj 
make all orders and judgments needful in the matter, and may 
appoint agents or a receiver to take possession of the property 
and effects of the company and to settle its affairs, subject to 
such rules and orders as the court from time to time prescribes 
C. S., s. 6296; Bev., b. 4702; 1899, c. 54, a. 14. 

702. Bevooation of license for violation of law or impalrad 
assets. 1. The authority of a domestic or foreign insurance com- 
pany may be revoked if it violates or neglects to comply with 
any provision of law obligatory upon it, and whenever in the 
opinion of the insurance commissioner its condition is unsound, 
or its assets above its liabilities, exclusive of capital and inclusive 
of reserve or unearned premiums estimated as provided by this 
chapter, are less than the amount of its original capital or re- 
quired unimpaired funds. 

2. If the insurance commissioner is satisfied at any time that 
any statements made by any company licensed under this chapter 
are untrue, or if a general agent fails or refuses to obey the 
provisions of this chapter, the insurance commissioner may re- 
voke and cancel such license. 

An insurance company violating any provision of this chapter, 
or refusing to submit to the examination provided for in section 
6277 of this chapter (686 herein), when requested, forfeits its 
right to do business in this state for twelve months thereafter, aod 
the insurance commissioner shall immediately revoke the license 
issued to such insurance company to do business in this state. 

C. 8., B. 8297; Bev., sh. 4703, 4705; IfiM, e. 54, hb. (16, 75, 112; IWI, 
e. 391, B. 5. 

703. Agents and adjusters most procure llceiue. Every agent 
or adjuster of any insurance company authorized to do business 
in this state shall be required to obtain annually from the in- 
surance commissioner a license under the seal of his office, show- 
ing that the company for jvhich he is agent or proposes to adjust 
is licensed to do business in this state, and that he is an agent of 

DidilzedbyCoO^Ie 



NoBTH Carolina Cospobation Code 329 

such company and duly authorized to do boainess for it. And 
t^ery such agent or adjuster, on demand, shall exhibit his license 
to any officer or to any person from whom he shall solicit is- 
nirance. 

1. 81; 1901, c 891, a. 7; 1903, c. 438, 

I. 

704. Application for license. Before a license is issued to an 
insurance agent or adjuster in this state, the agent or adjuster 
and the company for which he desires to act shall apply for the 
license on forms to be prescribed by the insurance commissioner ; 
and before be issues a license to such agent or adjuster, the in- 
surance commissioner shall satisfy himself that the person apply- 
ing for license as an agent or adjuster is a person of good moral 
character, that he intends to hold himself out in good faith as an 
insurance 'agent or adjuster, and has sufficient knowledge of the 
basiness proposed to be done, that he has not wilfully violated any 
of the insurance laws of this state, and that he is a proper person 
for such position. 

C. S., 8. 6299; 1913, a. 79, s. 1; 1915, «. 109, sb. 6, 7, c. 166, a. 7. 

706. Power of commisBloBer to revoke liceme. When the in- 
surance commissioner is satisfied that any insurance agent or 
adjuster licensed by this state has wilfully violated any of the 
insurance laws of this state, or has wilfully overinsured property 
of any of the citizens of the state, or has wilfully misrepresented 
any policy of insurance, or has dealt unjustly with or wilfully 
deceived any citizen of this state in regard to any insurance 
policies, or has failed or refused to pay over to the company which 
he represents, or has represented, any money or property in the 
hands of such agent or adjuster belonging to the company, when 
demanded, or has in any other way become unfit for such position, 
the commissioner may revoke, and it shall be his duty to revoke, 
the license of such agent or adjuster for all the companies which 
he represents in this state for such length of time aa he may de- 
cide, not exceeding one year. The insurance commissioner shall 
give to the agent or adjuster ten days notice of the revocation 
of such license, and shall give the reasons therefor; and the 
ageot or adjuster shall have the right to have such revocation re- 
viewed by any judge of the superior court of Wake county upon 
appeal. For the purpose of investigation under this section, the 
insurance commissioner shall have all the powers conferred upon 
him by section 6431 of this chaptr (Consolidated Statutes), 

C. a, 1. 6300; 1913, c. 79, as. 2, 3; 191S, c. 168, a. 7. r.Kmz^dD, CjOC^Ic 



330 NOETH CAKOLINA COKPOEATION CODE 

706. Non-resident a^renta forbidden; exception. No non-resident 
of the state shall be licensed to do business in the state, except 
as a special agent or organizer, and then only vrh«n he reports 
his bu^ness for record as North Carolina business to some general 
or district agent of bis company in the state, or having territory 
within the state. 

C. S., a. 6301; Bev., a. 1707; 1899, e. 54, b. lOS; 1903, c. 438, s. 11. 

ART. 4. DEPOSIT OP SECURITIES. 

707. Depodts held in trust hy commissioner or treasnro'. 

1. Deposits hy domesHc company. The insurance commissioner 
or the treasurer, in their official capactiy, shall take and hold in 
tmst deposits made by any domestic insurance company for the 
purpose of complying with the laws of any other state to enable 
the company to .do business in that state. The company making 
the deposit is entitled to the income thereof, and may, from time 
to time, with the consent of the insurance commissioner or treas- 
urer, and when not forbidden by the law under which the deposit 
was made, change in whole or in part the securities which com- 
pose the deposit for other solvent securities of equal par value. 
Upon request of any domestic insurance company such officer 
may return to the company the whole or any portion of the se- 
curities of the Company held by him on deposit, when he is 
satisfied that they are subject to no liability and are not required 
to be longer held by any provision of law or purpose of the 
original deposit. 

2. Deposits by foreign company. The commissioner or treas- 
urer may return to the trustees or other representatives authorized 
for that purpose any deposit made by a foreign insurance com- 
pany, when it appears that the company has ceased to do busi- 
ness in the state and is under no obligation to policyholders 
or other persons in the state for whose benefit the deposit was 
made. 

3. Action to enforce or terminate the trust. An insurance 
company which has made a deposit in this state pursuant to this 
chapter, or its trustees or resident managers in the United States, 
or the insurance commissioner, or any creditor of the company, 
may at any time bring an action in the superior court of Wake 
county against the state and other parties properly joined therein, 
to enforce, administer, or terminate the trust created by the de- 
posit. The process in this action shall be served on the officer of 



NOBTH CABOLINA C<»P0BATI0N GODE 331 

the state having the deposit, who shall appear and answer in 
behalf of the state and perform such orders and judgments as 
the court may make in such action. 

C. S., B. 6313; Eev., ■. 4709; 1899, e. 5*, ■. 17; 1901, e. 391, i. S; 1903, 
«. 138, a. 1; 1903, c. 536. b. 4. 

708. Deposits subject to approval and control of commissioner. 

The deposits of securities required to be made by any insurance 
company of this state shall be approved by the insurance com- 
missioner of the state, and he may examine them at all times, and 
may order all or any part thereof changed for better security, and 
no change or transfer of the same may be made without his 



C. S., i. 63H; Bev., s. 4710; 1903, e. 536, s. 5. 

709. Deposits by foreign companies required and regrulated. 
A foreign company, if incorporated or associated under llie laws 
of any government or state other than the United States or one 
of the United States, shall not be admitted to do business in this 
state until, in addition to complying with the conditions by law 
prescribed for the licensing and admission of such companies to 
do business in this ijtatc, it has made a deposit with the treasurer 
or insurance commissioner of this state, or with the 'financial 
officer of some other state of the United States, of a sum not 
less than the capital required of like companies under this chapter. 
This deposit must be in exclusive trust for the benefit and se- 
curity of all the company's policyholders and creditors in the 
United States, and may be made in the securities, but subject to 
the limitations, specified in this chapter with regard t<i the in- 
vestment of the capital of domestic companies formed and or- 
ganized under the provisions of this chapter. The deposit shall 
be deemed for all purposes of the insurance law the capital of the 
company making it. 

C. a, e. 6315; Rev., i. 4711; 1899, c. 54, b. 64; 1903, c. 438, a. 6. 

710. Deposits by life companies not chartered in TJoited States. 
Every life insurance company organized under the laws of any 
other country than the United States must have and keep on 
deposit with some state inaurance department or in the hands 
of trustees, in exclusive trust for the security of its contracts 
^rith policyholders in the United States, funds of an amount 
equal to the net value of all its policies in the United States and 
not less than two hundred thousand dollars. 

C. B, a. 6816; Eev., ■ 4712; 1899, c 54, a. 66. 

Denized bvCjOOgIc 



332 North Cabouna Corposation Code 

711. Depoaits hj foreign Are insurance companies; unonnt and 
nature of deposit reqoired. Unless otherwise provided in this 
article, every fire insuraoce . compaoy chartered by any other 
state or foreign government shall, by their general agent or 
through some authorized officer, deliver under oath to the in- 
surance commissioner of this state a statement of the amount of 
capital stock of the company, and deposit with him bonds of the 
United States, or of the state of North Carolina, or of the cities 
or counties of this state, or first mortgages on real estate situated 
in this state to be approved by the insurance commissioner, as 
follows: Companies whose capital stock is five hundred thousand 
dollars or less, ten thousand dollars ; companies whose capital 
stock is more than five hundred thousand dollars and not over one 
million dollars, twenty thousand dollars; companies whose capital 
stock is in excess of one million dollars, tweaty-five thousand 
dollars; and the insurance commissioner shall thereupon give the 
agent a receipt for the same. With securities so deposited the 
company shall at the same time deliver to the insurance commis- 
sioner a power of attorney authorizing him to transfer said se- 
curities or any part thereof for the purpose of paying any of the 
liabilities provided for iu this article. The insurance commis- 
sioner shall require each company to make good any depreciation 
or reduction in value of the securities. The securities required 
to be deposited by each insurance company in this article shall 
be delivered for safe-keeping by the insurance commissioner to 
the treasurer of the state, who shall receipt him therefor. For 
securities so deposited the faith of the state is pledged that they 
shall be returned to parties entitled to receive them or dbposed 
of as hereinafter provided for. The securities deposited by any 
company under this article shall not, on account of such securities- 
being in the state, be subjected to taxation, but shall be held 
exclusively and solely for the protection of contract holders. 

C 8., B. 6443; 1909. c. 923, 8. 1; 1911, c. 164, s. 1; Ex. Sess. 1913. p. 62, 
u. 1, 2, Si IBIS, c. 166, a. 6. 

ART. 5. LICENSE FEES AND TAXES. 

712. Sohednle of lioeiue fees, taxes, and cbaxgw. The in- 
surance commissioner shall collect and pay into the state treasury 
fees, taxes, and charges as follows : 

1. For each license issued to: a life insurance company or as- 
sociation, two hundred and fifty dollars ; a fire insurance company 
or association, or to any company or association of companiea 
operating a separate or distinct plant of agencies, two hundred 

r.,u:..J.y,.C.O()3lC 



North Cabolina Coepohation Code 333 

dollars; an accident inanrance company or aasociation, two hun- 
dred dollars; a marine insurance company or association, two 
hundred dollars; a surety insurance company or aasociation or 
mutual fire insurance company doing only one class of fire in- 
surance business, two hundred dollars; a plate-glass insurance 
eompany or association, two hundred dollars ; a boiler insurance 
company or association, two hundred dollars ; a domestic mutual 
imnrance company, fifty dollars; a domestic mutual immraace 
company, operating in not more than two counties, ten dollars; 
reciprocals or inter-insurers, one hundred dollars; to a fraternal 
order, twenty-five dollars; a bond, investment, dividend, guar- 
antee, registry, title guarantee or debenture company, two hun- 
dred dollars ; all other insurance companies or associations, two 
hoadred dollars. An underwriters agency, composed of two or 
more companies, proposing to do a reinsurance business only in 
the state may be licensed without a separate license for each com- 
pany, upon filing with th& insurance commissioner a statement 
of each eompany, the amount proposed to be assumed by them, 
and such other information as he may call for, showing that the 
companies are solvent and propose to conduct the business in a 
way that would be safe and fair to the citizens of the state. 

Provided, that so much of said license fees collected from fire 
insurance companies as may be necessary shall be used by the 
insorance commissioner for the prevention of fire waste and 
accidents. 

2. All of said companies shall pay a tax of two and one-half 
per centum upon the amount of their gross receipts in this state, 
with no deduction for dividends, whether returned in cash or al- 
lowed in payment or reduction of premiums, or for additional 
msnrance, and without any deduction except for return premiums: 
Provided, that if any general agent or officer of a company shall 
file with the insurance commissioner a sworn statement showing 
that at least one-fourth of the entire assets of his company are 
invcBted in and are maintained in any or all of the following se- 
curities or property, viz.: bonds of this state or of any county, 
city or tovra in this state or any property situated in this state 
and returned for taxation therein, or in loans to its North 
Carolina policyholders against the reserve ontheir policies, then 
the tax shall be one per centum upon the gross premium receipts 
aforesaid, and the license fee shall be one-half that named above : 
and if the amount so invested shall be three-fourths of its total 
assets, the tax shall be one-quarter of one per centum of its gross 
premium receipts and the license fee shall be one-half that named i , 



334 NOETH CASOLINA CORPORATION COOB 

above : Provided, that if such company ia chartered in this state 
and maintains its main office herein, then if the amount so in- 
vested shall be equal to its total reserve on busineae derived from 
this state, the tax shall be one-quarter per centum upon the gross 
premium receipts in this state, and the license fee shall be one- 
half that named above. 

Query: Does Bethlehem Motors Corporation et al v. Flynt, 
Sheriff, et al, 2r»6 U. S. 421, 41 8. €t. 571, render the foregoing 
provision for graduation of license tax unconstitutional! 

Companies paying the tax levied in this section shall not be 
liable for frauchise tax on their capital stock, and no county, city 
or town shall be allowed to impose any additional tax, license or 
foe. The license fees and taxes imposed in this section shall be 
-paid to the insurance commissioner and by him paid into the state 
treasury as provided by law. 

3. He shall collect annually for license issued each special or 
district agent or manager or organizer (including seal) five dol- 
lars; for license, including seal to each local or canvassing agent, 
two dollars; but any such company having assets invested and 
maintained as provided in this section shall only be charged for 
such license, one dollar. And for each special agent's lici'nse, 
two dollars and fifty cents. In case of loss or dostruclion of such 
license the insurance commissioner, for a fee of fifty cents, may 
certify to its issuance, giving number, date and form which may 
be used by the original party named therein in lieu of said origi- 
nal license. There shall be no charge for the seal affixed to sueh 
certificate or said license. 

Individuals, firms and corporations exchanging reciprocal or 
inter-insurance contracts as provided herein, shall pay through 
their attorneys an annual license of one hundred dollars and two 
and one-half per centum of the gross premium deposits, reduced 
by all sums distributed among the subscribers, or credited to their 
account, and also other regular fees. 

Every person, firm, association, or corporation operating what 
are known as Morris plan companies, or doing a similar bnsinegs 
in this state, shall pay an annual tax of twenty-five dollars. Said 
tax shall be paid to the insurance commissioner and by him into 
the state treasury as other license, taxes and fees collected by 
him. 

4. Annually twenty dollars for each license issued to a resident 
broker, authorized to procure insurance in uonadmitted com- 
panies, and also a tax of five per centum on his gross premium 
receipts. 

DidilzedbyCoO^IC 



NOBTR CAKOLINA CORPOBATION CODB 335 

5. For filing and exsmining statement preliminary to admiasion, 
twenty dollars; for filing and auditing annual statement, ten 
dollars ; for filing any other papers required by law, one dollar ; 
for each cei^ificate of examination, condition, or qualification of 
eompany or association, two dollars; for each seal when required, 
one dollar; for each examination of domestic company, twenty- 
five dollars; for each examination of foreign company, fifty 
dollars ; for filing charter and other papers of a fraternal order, 
preliminary to admission, twenty-five dollars. 

6. To be paid to the publisher, for the publication of each fi- 
nancial statement, nine dollars. 

7. The commissioner shall receive for copy of any record or 
paper in liis ofBce ten cents per copy sheet and one dollar for 
certifying same, or any fact or data from the records of his office ; 
for making and mailing abstracts to the clerks of the superior 
courts in the counties of the state, four dollars ; for examination 
of any foreign eompany, twenty-five dollars per diem and all 
expenses, and for examining any domestic company, actual er- 
penses incurred ; for the examination and approval of charters 
of companies, five dollars; also, to defray the expense of com- 
puting the value of the policies of domestic life insurance com- 
panies, one cent for every thousand dollars of the whole amount 
insured by its policies so valued. 

8. He shall collect all other fees and charges due and payable 
into the state treasury by any eompany, association, order, or 
individual under his department. 

C. S., B. 6318; Rev., s. 4715; 1899, c. S4, w. 50, 68, SCI, 81, R2, 87, 90, 62; 
1901, c. 3B1, B. 7, e. 700, 8. 2; 1903; f. 438, bb. 7, 8; 1903, c 536, b. 4; 1903, 
M. 680, 770; 1905, c. S8S, b. 68; 1913, c. 140, b. 1; 1B19, c. 186, s. 8; 1920, 
«. 1, 8. 7 ,i, 7 k, 7 i; 1921, c 34, s. 67, 



s § 20. A tax of 2Vi per eent. upon the amount of groBB re- 
ceipts of insurance companiea from the buBiness done within the state Ib 
a license or franehise tai for the privilege of doing bnainess in the state.— 
Pittsburgh Life & TroBt Co. v. Young, 172 N. C. 470, S. E, 568. 

InsurancB g 20. The privilege to continue to reinsure in the state, by 
reeeiying renewal premiums from time to time as thev mature or berome 
due, IB doing business" in the state. — Ibid, 

713. No additional charge by countaeg or towns. No county 
or municipality may impose an additional tax, license, or fee upon 
any insurance company or agent. 

C. a, 8. 6319; Bov,, ■. 4716; 18M, c. 54, s. 7fl; 1901, c. 391, s. 7- 1903 
t. 438, B. 8. I > . 

714. Lioeiue fe«8 for more than one clau of insurance. No 

inanrance company admitted to do busineas in the state shall be 
authorized to transact more than one class or kind of insnranm .[,, 



3S6 NoBTH Carolina Corporation Code 

therein, unless it pays the license fees for each class. But upon 
the payment of the largest license fees provided in this chapter 
for any one business done a life insurance company may do a 
health business, and a fire insurance company may insure against 
loss or damage to property by lightning, wind, hail, or tornado, 
use and occupancy, and for uonoccupancy, and may insure ves- 
sels, freights, goods, money, effects, and money lent on bottomry 
or respondentia against the perils of the sea and other perils 
usually insured against by marine insurance, including risks of 
inland navigation and transportation ; and may also insure against 
loss or damage by water to any goods or premises arising' from 
leakage of sprinklers and water-pipes. No insurance eompanj 
may be required to pay license fees amounting in the aggregate 
to more than three hundred and fifty dollars per annum. 

C. S., B. 6320; Bev., s. 471T; 1890, c. 5^, s, 63; 1901, v. ::9!, ». 7.: \<m, 
c. 438, s. 6. 

716. Licenses run from April first; pro rata payment. The 
licenses required by this chapter shall continue for the next en- 
suing twelve months after April first of each year, unless revoked 
as provided in this chapter; but the insurance commissioner may, 
when the annual license tax exceeds twenty-five dollars, receive 
from applicants after April first so much of the license fee re- I 
quired by law as may be due pro rata for the remainder of the I 
year, beginning with the first day of the current month. 

C. S., B. 6321; Rev., a. 4718; 1899, ,-. 54, s. 78. 

716. Statements of gross receipts filed and tax paid. Every 
gAieral agent shall, within the first thirty days of January and 
July of each year, make a full and correct statement, iinder oath 
of himself and of the president, secretary, or some officer at the 
home or head office of the company in this country, of the amount 
of the gross receipts derived from the insurance business under 
this chapter obtained from residents of this state, or on prop- 
erty located therein during the preceding six months, and shall, 
within the first fifteen days of February and Angust of each year, 
pay to the insurance commissioner the tax imposed by this chapter 
upon such gross receipts. 

C. 8., B. 6822; Kev., b. 4719; 1899, c. 54, a. 79; 1901, <■. 391, n. 7; 1903, 
e. 438, B. 8. 

717. Policyholders to furnish InformatioD. To enable the in- 
surance commissioner the better to enforce the payment of the 
taxes imposed by this chapter, every corporation, firm, or indi- 
vidual doing business in the state shall, upon demand of the com- 
missioner, furnish to him, upon blanks to be provided by him, s 



North Carolina Corporation Code 337 

statement of the amount of all insuraDce held by them, giving the 
name of the company, number, and amount of policies and the 
premiums paid on each, and such other information as the com- 
missioner calls for, or shall file an affidavit with the eommissioner 
that all their insurahee is placed in companies licensed to do busi- 
nesa in this state. 

C. 8., 9. 6323; Hev., s. 4720; 1809, c. 54, s. TB; 1901, e. 391, s. 7; 1803, 
e. 438, a. 8. 

SUBCHAPTER II. INSURANCE COMPANIES. 
ART. 6. GENERAL DOMESTIC COMPANIES. 

718. Application of this chapter and general laws. The gen- 
eral provisions of law relative to the powers, duties, and liabili- 
ties of corporations apply to all incorporated domestic insurance 
companies where pertinent and not in confiict with other provi- 
sions of law relative to such companies or with their charters. 
All insurance companies of this state shall be governed by this 
chapter, notwithstanding anything in their special charters to the 
contrary, provided notice of the acceptance of this chapter is 
filed with the insurance eommissioner. 

C. a, s. 6324; Bev., b. 4721; 1899, c. 54, 8. 19. 

719. Eztenfiion of existing charters. Domestic insurance com- 
panies incorporated by special acts, whose charters are subject 
to limitation of time, shall, after the limitation expires, and upon 
filing statement and paying the taxes and fees required for an 
amendment of the charter, continued to be bodies corporate, 
subject to all general laws applicable to such companies. 

C. S., B. 6325; Bev., s. 4722; 1899, e. 54, a. 20. 

720. Certificate required before issuing policies. No domestic 
insurance company may Issue policies until upon examination of 
the insurance commissioner, his deputy or examiner, it is found 
to have complied with the laws of the state, and until it has ob- 
tained from the insurance commissioner a certificate setting forth 
that fact and authorizing it to issue policies, the issuing of poli- 
cies in violation of this section renders the company liable to the 
forfeiture prescribed by law, but such policies are binding upon 
the company, 

C. a, ■. 6320; Rev., b. 4723; 18»d, c. 54, m. 21, 99; 1903, e. lit)", h. 10. 

721. Purposes of organisation. Insurance companies, associa- 
tions, or orders may be formed as provided in the two next suc- 
ceeding sections for any one of the following purposes : 

1. Fire and storm. To insure against loss or damage to pr op- 



338 North Carolina Corporation Code 

erty by fire, lightning, wind, bail, or tornado, use and occupancy, 
and for nonoccupancy, upon the atock or mutual plan. 

2. Marine. To insure, upon the stock or mutual plan, ves- 
sels, freights, goods, money, effects, and money lent on bottomry 
or respondentia against the perils of the sea 'and other perils usu- 
ally insured against by marine insurance, including risks of in- 
land navigation and transportation. > 

3. Life. To carry on the business commonly known as life in- 
surance on the stock or mutual plan, contract for the payment of 
endowments or annuities, or make and enter into such other con- 
tracts conditioned upon the continuance or cessation of human 
life. 

4. Sickness. Against disablement resulting from sickness and 
every insurance appertaining thereto. 

5. Accident. Against injury, disablement, or death resulting 
from traveling or general accident and every insurance apper- 
taining thereto. 

6. Fidelity and surety. Guaranteeing the fidelity of persons 
holding places of public or private trust, and guaranteeing the 
performance of contracts other than insurance policies, and 
guaranteeing and executing all bonds, undertakings, and con- 
tracts of suretyship. And a company is authorized to execute 
such bonds, undertakings, and contracts of suretyship by itself, 
though a statute requires two or more sureties. 

7. Plate-glass. Upon glass against breakage. 

8. Liability. Insuring any one against loss or damage result- 
ing from accident to or injury, fatal or nonfatal, suffered by an 
employee or other person, for and which the person insured is 
liable. 

9. Boiler and machinery. Upon steam boilers and upon pipes, 
engines, and machinery connected therewith or operated thereby, 
against explosion and accident and against loss or damage to 
life, person, or property resulting therefrom. And a company is 
authorized to make inspection of and to issue certificates of in- 
spection upon such boilers, pipes, engines, and machinery. 

10. Burglary. Against loss by burglary or theft, or both. 

11. Credit. To carry on the business commonly known as credit 
insurance or guaranty, either by agreeing to purchase uncollect- 
ible debts or otherwise to insure against loss or damage from the 
failure of persons indebted to the iiuured to meet their liabilities. 

12. Sprinkler. To insure against loss or damage by water to 
any goods or premises arising from the breakage or leakage of 
sprinklers and water-pipes. And a company is aa^orized to 

DidilzedbyCoO^IC 



N(mTH Carolina Corporation Code 339 

make inspection of and to issue certificates of inspection upon 
BDch sprinklers and pipes. 

13. Accidents to vehicles. To insure against loss or damage to 
property arising from accidents to elevators, automobiles, bi- 
cycles, and vehicles, except rolling stock of railways. 

14. Livestock. To insure horses and other live-stock against 
death and damage. 

15. Jieal estate title. For the purpose of examining titles to 
real estate and furnishing information in relation thereto, and of 
insuring owners and others interested therein against loss by 
reason of encumbrances and defective title. 

16. Miscellaneous. Against any other casualty authorized by 
(he charter of the company, not included .under the heads of life, 
fire, marine, or title insurance, which is a proper subject of in- 
surance. No corporation so formed may transact any other busi- 
ness than that specified in its charter and articles of association. 

C. a, a. 6327; Bev., s. 4726; 1899, c. 54, as. 24, 26; 1903, c. 438, a. 1; 1911, <■. 
Ill, a. 1. 

722. Hannerof creating such corporations. The procedure 
for organizing such corporations is as follows: The proposed in- 
corporators, uot less than ten in number, a majority of whom 
must be residents of the state, shall subscribe articles of associa- 
tion setting forth their intention to form a corporation; its pro- 
posed name, which must not so closely resemble the name of an 
existing corporation doing business under the laws of this state 
as to be likely to mislead the public, and must be approved by the 
insurance commissioner; the class of insurance it proposes to 
transact and on what business plan or principle ; the place of its 
location within the state, and if on the stock plan, the amount of 
its capital stock. The words "insurance company," "insurance 
association," or "insurance society" must be a part of the title 
of any such corporation and also the word "mutual," if it is or- 
ganized upon the mutual principle. The certificate of incorpo- 
ration must be subscribed and sworn to by the incorporators be- 
fore an officer authorized to take acknowledgment of deeds, who 
shall forthwith certify the certificate of incorporation, as so made 
out and signed, to the insurance commissioner of the state at his 
office in the city of Raleigh. The insurance commissioner shall 
examine the certificate, and if he approves of it and finds that the 
requirements of the law have been complied with, shall certify 
such facts, by certificate on such articles, to the secretary of 
state. Upon the filing in the office of the secretary of state of the 
certificate of incorporation and attached certificates, and t^e pay- 

.Hz^dbvCjOogle 



340 North Carolina Cobpobation Code 

meat of a charter fee in the amount required for private corpora- 
tions, and the same fees to the secretary of state, the secretary 
of state shall cause the certificate and acGompanyiiig certificates 
to be recorded in his office, and shall issue a certificate in the fol- 
lowing form: 

Be it known that, whereas (here the names of the aubaeriberB to the 
articles of asBociatiou shall be inserted) have associated themselves with 
the inteutiou of forming a eOTporation under the name of (here the name 
of the corporation shatl be inserted), for the purpose (here the purpose 
declared in the articles of association shall be inaerted), with a capital (or 
with a permanent fund) of (here the amount of capital or permanent fund 
fixed in the articles of aasociation shall be inserted), and Gave complied 
with the provisions of the atatute of this state in such case made and pro- 
vided, as appears from the following certified articles of association: (Here 
cop7 articles of association and accompanying certificates). Now, there- 
fore, I (here the name of the secretary shall be inserted), secretary of state, 
hereby certify that (here the names of the subscribers to the articles of 
association shall be inaerted), their aaaociatee and succeaaors, are legally 
organized and eatablished as, and are hereby made, an existing corporation 
under the name of (here the name of the corporation shall be inserted), 
with such articles of association, and have all the powers, rights, and priv- 
ileges and subject to the dutiea, liabilities, and restrictions which by law 
appertain thereto. 

Witness my ofBcial signature hereunto aubacribed, and the seal of the 

State of North Carolina hereunto affixed, this the day of , 

in the year (in these blanks the day, month, and year of execution 

of this certificate shall be inserted; and in the case of purely mutual com- 
panies, 80 much as relates to capital stock shall be omitted). 

The secretary of state shall sign the certificate and cause the 
seal of the state to be affixed to it, and such certificate of incor- 
poration and certificate of the secretary of state has the effect of 
a special charter and is conclusive evidence of the organization 
and establishment of the corporation. The secretary of state 
shall also cause a record of his certificate to be made, and a certi- 
fied copy of this record may be given in evidence with the same 
effect as the original certificate. 

C .S., a. C328; Rev., s. 4727; 1899, e. 54, s. 23; 1903, p. 438, ss. 2, 3. 

723. First meeting; organization; license. The first meeting 
for the purpose of organization under such charter shall be called 
by a notice signed by one or more of the subscribers to the cer- 
tificate of incorporation, stating the time, place, and purpose of 
the meeting; and at least seven days before the appointed time 
a copy of this notice shall be given to each subscriber, left at faia 
usual place of business or residence, or duly mailed to his post- 
office address, unless the signers waive notice in writing. Who* 
ever gives the notice must make affidavit thereof, which affidavit 
shall include a copy of the notice and be entered upon the records 
of the corporation. At the first meeting, or any adjoumment 

. DidilzedbyCoO^IC 



North Cabolina Corporation Code 341 

thereof, an organization shall be effected by the choice of a tem- 
porary clerk, who shall be aworn; by the adoption of by-law8; 
and by the election of directors and such other officers as the by- 
laws require; but at this meeting no person may be elected di- 
rector who has not signed the certificate of incorporation. The 
temporary clerk shall record the proceedings until the election 
and qualification of the secretary. The directors so chosen shall 
elect a president, secretary, and other officers which under the 
by-laws they are bo authorized to choose. The president, secre- 
tary, and a majority of the directors shall forthwith make, sign, 
and swear to a certificate setting forth a copy of the certificate of 
incorporation, with the names of the subscribers thereto, the date 
of the first meeting and of any adjournments thereof, and shall 
submit such certificate and the records of the corporation to the 
insurance commissioner, who shall examine the same, and who 
may require such other evidence as he deems necessary. If upon 
his examination the insurance commissioner approves of the by- 
laws and finds that the requirements of the law have been com- 
plied with, he shall issue a license to the company to do business 
in the state, as is provided for in this chapter. 
C. a, B. 632B; Kev., s. 4728; IflBS, e. 54, h. 25; 1903, c. 438. as. 2. 3. 

724. By-laws; classiflcatton and election of directors. A do- 
mestic company may adopt by-laws for the conduct of its business 
not repugnant to law or its charter, and therein provide for the 
division of its board of directors into two, three, or four classes, 
and the election thereof at its annual meetings so that the mem- 
bers of one class only shall retire and their successors be chosen 
each year. Vacancies in any such class may be filled by election 
by the board for the unexpired term. 

C, S., s. 6330; Rev., b. 4724; 1899; c. 54, b. 22. 

726. Power to porchaae, bold, and convey real estate. Any 
company organized by special charter or under the provisions of 
the general insurance laws of this state may purchase, hold, and 
convey real estate for the sole purposes and in the manner herein 
Bet forth : 

1. Such as is necessary for its immediate use in the transaction 
of its business. 

2. Property mortgaged to it in good faith as security for loans 
previously contracted or for money due. 

3. Property conveyed to it in satisfaction of debts previously 
contracted in the course of its dealings, or purchased at sales 
upon judgments, decrees, or mortgages obtained or made for 
such debts. 

DiclzedbyCjOO^IC 



342 North Carolina Corporation Code 

4. It is unlawful for any such incorporated company to pur- 
chase or hold real estate in any other case or for any other pur- 
pose; and such real estate acquired, and not necessary for the ac- 
commodation of the company in the convenient transaction of its 
business, shall be sold and disposed of within five years after the 
company has acquired title, and it is not lawful for it to hold the 
real estate for a longer period than that mentioned, unless it ac- 
quired such real estate prior to March sixth, one thousand ei(;ht 
hundred and ninety-nine, or procures a certificate from the in- 
surance commissioner that the interest of the company will suffer 
materially by a forced sale of such real estate, in which event the 
time for the sale may be extended to such a time as the insurance 
commissioner directs in the certificate. Nothing contained herein 
prevents any insurance company from improving and conveying 
its real estate, notwithstanding the lapse of five years from ita ac- 
quisition thereof, without having procured such certificate frona 
the insurance commissioner. 
C. S., 8. 63SI; Eev,, s. 4725; 1899, c. 54, a. 22; 19n3, c. 5S(i, s. 2. 

726. Amount of capital required. The amount of capital req- 
uisite to the formation and organization of companies under the 
provisions of this subchapter is as follows: Companies to insure 
plate-glass, not' less than ten thousand dollars. Companies issu- 
ing health policies, policies against damage by hail, or insuring 
marine risks or inland risks upon the stock plan, or insuring live- 
stock, not less than twenty-five thousand dollars. Companies for 
the purpose of transacting life or fire insurance on the stock plan, 
fidelity insurance, accident insurance, steam-boiler insurance, 
credit insurance, sprinkler insurance, and insurance against loss 
by accident to vehicles, not less than fifty thousand dollars; but 
life or accident companies on the industrial plan, issuing policies 
not over five hundred dollars, may be allowed to transact busi- 
ness with as little capital as twenty-five thousand dollars. Com- 
panies may be so formed to insure mechanics' tools and appara- 
tus against loss by fire for an amount not exceeding two hundred 
and fifty dollars in a single risk, with a capital of not less than 
ten thousand dollars, divided into shares of the par value of ten 
dollars each. 

C. a, 8. 6332; Bev., b. 4729; 1899, c. 54, ■. 26; 1903, e. 43S, a. 4; 1007, 
e. 1000, s. 5; 1913, c. 140, b. 2. 

727. Capital stock fully paid In cash. The capital stock shall 
be paid in cash within twelve months from the date of the charter 
or certificate of organization, and no certificate of fall shares and 
□0 policies may be issued until the whole capital is paid in. 



1 is paid in. A 



North Carolina Corporation Cote 348 

' majority of the directors shall certify on oatb that the money baa 
been paid by the stockholders for their respective sbsres and is 
held as the capital of the company invested or to be invested as 
required by the next succeeding section. 
C. 8., a. 6333; Rev., b. 4730; 1899, b. 54, s. 27. 

728. Inrestmnit of capital. Sach capital shall be invested only 
as follows : 

1. In first mortgage of real estate in this state. 

2. In bonds of the United States or of any of the states whose 
bonds do not sell for less than par. 

3. In the bonds or notes of any city, county, or town of thia 
state whose net indebtedness does not exceed five per centum of 
the last preceding valuation of the property therein for purposes 
of taxation. The term "net indebtedness" excludes any debt 
created to provide an electric light plant and equipment, sewerage 
system, and a supply of water for general domestic use, and al- 
lows credit for the sinking fund of a connty, city, town, or dis- 
trict available for the* payment of its indebtedness. 

4. Any insurance company having a capital stock of more than 
one hundred thousand dollars may, with the consent of the insur- 
ance commissioner, after investing one hundred thousand dollars 
of the capital as provided in this section, invest the balance in 
such other securities or in such safe manner as may be approved 
by the commissioner. 

5. Any real-estate title insurance company organized for any 
of the purposes set forth in article fourteen of this chapter, and 
having a capital .stock of more than fifty thousand dollars, may, 
with the consent of the insurance commissioner, after investing 
fifty thousand dollars of the capital, as provided in this section, 
invest the balance thereof in abstracts of titles of property situ- 
ated in one or more of the cities or counties of this state. The 
amount of capital so invested shall in no event exceed one-fourth 
of the total capital stock of such company ; and no such company 
shall guarantee or insure in any one risk more than forty per cent 
of its combined capital and surplus. If the capital stock of such 
company does not exceed fifty thousand dollars, it may, with the 
consent of the insurance commissioner, after having invested 
three-fourths of its capital stock as now provided by law, invest 
the balance thereof in abstracts of titles of property situated in 
one or more of the cities or counties of this state. 

C. 8., g. 6334; Bev,, s. 4731; 1899, o. 54, b. 27; 1S07, c. 798: 1907, e. M8; 
1611, e. 3E; 1913, c. 200. Ex. 1920, c. 54. CoOqIc 



344 KOBTH Cabolina Cobp(»lation Code 

728. Authority to inorease or reduce capital stock. The in- 
suraoce eommissioner shall, upon application, examine the pro- 
ceedings of domestic c<)mpanies to increase or reduce their capi- 
tal stock, and when found conformable to law shall issue certifi- 
cates of authority to such companies to transact business upon 
such increased or reduced capital. He shall not allow stockhold- 
ers' obligations of any description as part of the assets or capital 
of any stock insurance company unless the same are secured by 
competent collateral. 

C. S., 8. 6335; Bev., b. 4732; 1899, c. 54. s. 15. 

730. Assessment of Bhares; revocation of license. When the 
net assets of a company organized under this article do not 
amount to more than three-fourths of its original capital, it may 
make good its capital to the original amount by assessment of its 
stock. Shares on which such an assessment is not paid within 
sixty days after demand shall be forfeitable and may be canceled 
by vote of the directors and new shares issued to make up the de- 
ficiency. If such company does not, within three mouths after 
notice from the insurance commissioner to that effect, make good 
its capital or reduce the same, as allowed by this article, its au- 
thority to transact new business of insurance shall be revoked by 
the commissioner. 

C. S., 3. 6336; Bv., a. 4733; 1399, c. 64, b. 28; 1903, c. 43S, b. 4. 

731. Increase of capital stock. Any company organized under 
this article may issue pro rata to its stockholders certificates of 
any portion of its actual net surplus it deems fit to divide, which 
shall be considered an increase of its capital to the amount of 
such certificates. The company may, at a meeting called for the 
purpose, vote to increase the amount and number of shares of its 
capital stock, and to issue certificates therefor when paid in full. 
In whichever method the increase is made, the company shall, 
within thirty days after the issue of such certificates, submit to 
the insurance commissioner a certificate setting forth the amount 
of the increase and the facts of the transaction, signed and sworn 
to by its president and secretary and a majority of its directors. 
If the insurance commissioner finds that the facts conform to the 
law, he shall endorse his approval thereof ; and upon filing such 
certificate so endorsed with the secretary of state, and the pay- 
ment of a fee of five dollars for filing the same, the cQ^mpany may 

DiclzedbyCjOO^IC 



NOKTH CABOLINA COBPOBATION COI^ 346 

traoBaet buainesa upon the capital as increaeed, and the insurance 
commissioner shall iasue his certificate to that effect. 
C. B., a. 6337; Bev., ■. 4734; 1899, c. 54, s. 29. 

732. Seduction of capital stock. When the capital stock of a 
company organized under this article ts impaired, the company 
may, upon a vote of the majority of the stock represented at a 
meeting legally called for that purpose, reduce its capital stock 
and the number of shares thereof to an amount not leas than the 
minimum sum required by law, but no part of its assets and 
property shall be distributed to its stockholders. Within ten 
days after such meeting the company must submit to the insur- 
ance commissioner a certificate setting forth the proceedings 
thereof and the amount of the reduction and the assets and lia- 
bilities of the company, signed and sworn to by its president, sec- . 
retary, and a majority of its directors. The insurance commis- 
sioner shall examine the facta in the ease, and if they conform to 
law, and in his judgment the proposed reduction may be made 
withont prejudice to the public, he shall endorse his approval 
upon the certificate. Upon filing the certificate so endorsed with 
the secretary of state and paying a filing tee of five dollars, the 
company may transact business upon the basis of the reduced 
capital as though it were original capital, and its charter shall 
be deemed to be amended to conform thereto, and the insurance 
commisaioner shall iasue his certificate to that effect. The com- 
pany may, by a majority vote of its directors, after the reduction, 
require the return of the original certificates of stock held by 
each stockholder in exchange for new certificates it may issue in 
lieu thereof for such number of shares as each stockholder is en- 
titled to in the proportion that the reduced capital bears to the 
original capital. 

C. S., B. 6338; Bev., b. 4735; 1699, c. 54, a 30. 

788. Dividends declared; liabili^ of stockholders for nnlawftil 
dividends. No stock company organized under this article may 
pay a cash or stock dividend except from its actual net surplus 
computed as required by law in its annual statements, nor may 
any such company which has .ceased to do new business of insur- 
ance divide any portion of its assets, except surplus, to its stock- 
holders, until it has performed or canceled its policy obligations. 
No dividend shall be paid by any company incorporated in this 
state when its capital stock is impaired, or when such payment , 



846 North Cabolina Corpcssation Code 

would have the effect of impairing its capital stock ; and any divi- 
dend so paid subjects the stockholders receiving it to a joint and 
several liability to the creditors of said company to the extent of 
the dividend so paid. 

C. 8., B. 6339; Eev., a. 47S6; 1899, c. 54, a. 31; 1903, c. 536, b. 3. 

734. Loans insnfflciently aeciired. Whenever it appears by ex- 
amination, as authorized by law, that an insurance company, or- 
ganized under the laws of this state, holds, as collateral security 
for the payment of any loan, any stock, bond, or security of what- 
ever description, which has not a cash market value of at least 
twenty-five per centum more than the amount of such loan, the 
insnraDce commissioner may require the reduction of the loan or 
an increase of the collateral security, so that the security shall be 
at least twenty-five per centum in excess of the amount loaned. 
If the company fail to comply with this requirement within ten 
days after receiving written notice thereof from the commis- 
sioner, it is the duty of the commissioner to disallow the loan and 
to deduct the amount thereof from the assets of the company. If 
it appears, upon examination, that any such insurance company 
holds, as security for any loan, a mortgage upon real estate which 
is not a first lien, or that the value of the real estate is less than 
fifty per centum in excess of the loan which it is mortgaged to 
secure, the insurance commissioner may disallow the loan and de- 
duct the amount thereof from the assets of the company holding 
it, after having given the company at least twenty days notice, 
in writing, to change or conform the loan to the requirements of 
this section. 

C. S., 8. 0340; Rev., b. 4757; 1903, e. 53fi, ss. 6, 7, 8. 

ART. 7. GUARANTY FUND FOB DOMESTIC COMPANIES. 



736. Goaranty fond established. Any insurance company 
formed as provided in the preceding article, or now existing by 
virtue of any of the laws of North Carolina, may establish a guar- 
anty fund of not less' than twenty-five thousand dollars nor more 
than two hundred thousand dollars, in the following manner : The 
company may receive from any person, firm, or corporation, mon- 
ey, bonds, or other securities, in such amount as may be agreed 
upon, for the purpose of providing a guaranty fund, to be used as 
hereinafter provided, for the payment of the claims of policyhold- 
ers. Upon the receipt of such bonds, money, or other securities by 
any insurance company, it shall issue its certificate in_writing, au- 

DiyilzcdbvCoO^fc 



North Cabolina Cobporation Cora: 347 

(hnticated as required by law for certificates of stock, stating ' 
the amouBt, terms, and conditions of repayment of such money 
a the return of such honds or other securities, the name of the 
payee or depositor, and the certificate shall also state upon its 
face that it is issued under the provisions of this section. The 
money, bonds, or other securities, when so paid" to or deposited 
with such insurance company, heeomcs a part of the guaranty 
fand of the company, and are liable for all the claims of policy- 
holders after the general assets of the company have been ex- 
hausted. This guaranty fund is not liable for the claims or debts 
due to atockholders or the general creditors of such insurance 
company. No insurance company shall create a guaranty fund, 
as provided in this article, except upon the approval of a ma- 
jority of its stockholders authorized at any regular or special 
meeting called for the purpose. 
C S., s. 6341 ; 1909, c. 922, s. 1. 

736. Separate accounts; application of fond. Every insurance 
company which establishes a guaranty fund under the provisions 
of this article must keep a separate account of the same on its 
books, together with a full and true list of any securities held 
therefor. The money and securities belonging to the guaranty 
fond must be invested in the same manner as is now provided by 
law for the investment of the other assets of insurance eompa- 
nies ; but any bond or other securities received by any such insur- 
ance company as a part of its guaranty fund may be deposited 
with the insurance commissioner, as is now allowed by law, sub- 
ject to the- farther provisions of this article. An insurance com- 
pany receiving said money or securities as a part of its guaranty 
fund, as herein provided, may pay to the person, firm, or corpo- 
ration from whom the same is received a semiannual dividend of 
not more than three and one-half per cent on the amount of said 
money or securities. The guaranty fund herein provided for 
shall be applied to the payment of claims of policyholders only 
when the insurance company has exhausted its cash on hand and 
the invested assets, exclusive of uncollected premiums ; and when 
the guarantee is in any way impaired the directors may make 
good the whole or any part of such impairment by assessments 
upon the contingent funds of the company at the date of such 
impairment, if any are available. 

C, S., B. 6342; 1909, e. 922, s. 1. 

787. Bednction or retiremttnt of ftind. The guarantee fund 
■hall be retired when the permanent fund of the compaiiy(et(aali^[,> 



348 North Carolina Corporation Code 

two per centum of the amount insured Upon all policies in force; 
and such guarantee fund may be reduced or retired by vote of 
the directors of the company and the assent of the insurance 
commissioner, if the net assets of the company above the rein- 
surance reserve and all other claims and obligations, exclusive of 
the guaranty fund, for two years immediately preceding and in- 
cluding the date of its last annual statement, are not less than 
twenty-five per centum of the fund. Due notice of this propose^ 
action on the part of the directors of the company must be mailed 
to each director of the company not less than thirty days before 
the meeting when such action may be taken, and must also be 
advertised in two newspapers of general circulation, to be ap- 
proved by the insurance commissioner, not less than twice a week 
for a period of not less than four weeks before the meeting. No 
insurance company with a guaranty fund, as hereinbefore pro- 
vided, which has ceased to do new business, may return or retire 
any part of the guaranty fund or divide to its stockholders any 
part of its general assets, except incomes from its investments, 
until it shall have performed, reinsured, or canceled its policy 
obligations. 
C. S., s. 6343; 1909, e. »22, a. 1. 

738. Insolvency; return of fund. In the event of insolvency 
or voluntary liquidation of any such insurance company, the 
amount of the guaranty fund shall be returned to the persons, 
firms, or corporations, their heirs, executors, administrators, 
successors, or assigns, from which the same was received, in full 
or pro rata, as the case may be, before any amount shall be paid 
from the assets of said company to its stockholders. The inten- 
tion of this section is that the liability of the company for the 
repayment or the return of its guaranty fund, as evidenced by 
its certificates therefor, as hereinbefore provided, shall be pre- 
ferred in the distribution of its assets to the stockholders and 
general creditors of the company, other than its policy obliga- 
tions. 

C. 8., a 6344; IfiOQ, c. 022, s. 1. 

739. Conversion to guaranty fund. Any insurance company 
now doing business as a domestic insurance company under the 
laws of this state which has received any money or securities 
to be held as a guaranty capital, guaranty surplus, or guaranty 
fund, may convert the same into a guaranty fund, aa hereinbefore 
provided, by mutual agreement between the board- pi durefstors 



North Carolina Corpoeation Code 349 

if the insurance company and the parties from whom the money 
or securities have been received, subject, however, to the approval 
of the inaurance commissioner, and thereupon certificates shall 
be issued therefor, as hereinbefore provided, and the same shall 
thereafter be held subject to the rights and liabilities provided 
in this article. 

C. S., B. 634S; 1909, c. 922, s. 2. 

ART. 8. MUTUAL INSURANCE COMPANIES. 

740. Mntnfd fire insurance companies organized ; requisites for 
doing ImsinesB. Mutual fire insurance companies may be formed 
under this article, but no policy may be isaued by a purely mutual 
fire insurance company, or by a mutual fire insurance company 
with a guaranty capital of less than fifty thousand dollars, until 
not less than two hundred thousand dollars of insurance, in not 
less than two hundred separate risks upon property located in 
North Carolina, has been subscribed for and entered on its books ; 
but in the formation of mutual fire insurance companies to operate 
in no more than two counties of this state, whether town or 
farmers' mutuals, the requirement as to amount of insurance shall 
be twenty-five thousand dollars in risks owned by at least twenty- 
five adult residents of such towns or counties; but where there 
is an association or corporation for the purpose of interinsurance 
or mutual protection between members of said association or 
corporation, which members or stockholders are engaged in the 
same line of business, the requirement shall be fifty instead of two 
hundred separate risks. No policy may be issued under this sec- 
tion until the president and the secretary of the company have 
certified under oath that every subscription for insurance in the 
list presented to the insurance commissioner for approval is 
geDaine, and made with an agreement with every subscriber for 
insurance that he will take the policies subscribed for by him 
within thirty days after the granting of a license to the company 
by the insurance commissioner to issue policies. 

9H. 25, 32, 34; ISOl, c. 391, s. 3; 

741. AuessmentB kept in treasury; certain officers debarred 
biaa commisaloiis. Every mutual or assessment company or as- 
sociation organized or doing business in the state on the assess- 
ment plan shall keep in its treasury at least one assessment suffi- 
cient to pay one average loss. No officer or other person whose r 



350 North Carolina Corporation Code 

duty it is to determine the character of the risk, and apoD whose 
decision the application shall be accepted or rejected by a mutual 
fire insurance company, shall receive as any part of his compen- 
sation a commission upon the premiums, but his compensation 
shall be a fixed salary and such share in the net profits aa the 
directors may determJue, Nor shall such officer or person be an 
employee of any officer or agent of the company. 

C. S., a. 6S4T; Rev., a. 4738; 1899, c. 54, a. 32; 1903, c. 438, a. 4. 

742. Policyholders are members of mntnal flre companies. 
Every person insured by a mutual fire insurance company is a 
member while his policy is in force, entitled to one vote for each 
policy he holds, and must be notified of the time and place of 
holding its meetings by a written notice or by an imprint upon 
the back of each policy, receipt, or certificate of renewal, as 
follows : 

The insured is hereby notified that by virtue of this policy he 

is a member of the insurance company, and 

that the annual meetings of the company are held at its home 

office on the day of , in each year, 

at o'clock. 

The blanks shall be duly filled in print and are a sufficient 
notice. A corporation which becomes a member of such company 
may'authorize any person to represent it, and this representative 
has all the rights of an individual member. A person holding 
property in trust may insure it in such company, and as trustee 
assume the liability and be entitled to the rights of a member, 
but is not personally liable upon the contract of insurance. Mem- 
bers may vote by proxies, dated and executed within three months, 
and returned and recorded on the books of the company three 
days or more before the meeting at which they are to be uaed; 
but no person as proxy or otherwise may "cast more than twenty 
votes. 

C. B., B. 634S; Bev., a. 4739; 189S, c. 54, b. 33. 

743. Directors in mutual flre companies. Every mutual fire 
insurance company shall elect by ballot a board of not less than 
seven directors, who shall manage and conduct its business and 
hold office for one year or for such term as the by-laws provide 
and until their successors are qualified. Two-thirds at leaat of 
the directors must be citizens of the state, and after the first 
election members only are eligible, but no director is disquaUfied 



North Cabolina Corporation Code 351, 

from serving the term he was chosen for by reason of the ex- 
piration or cancellation of his policy. In companies with a 
guaranty capital, one-half of the directors shall be chosen by and 

from the stockholders. 
C. S., B. 6349; Bev., s. 4739; 1899, r. 54, s. 33. 

744. Hntnal fire companieB with a guaranty capital. A mutual 
fire insurance company formed as provided in this article, or a 
mutual fire insurance company now existing, may establish a 
guaranty capital or surplus of not less than twenty-five thousand 
dollars nor more than two hundred thousand dollars, divided 
into shares of one hundred dollars each, which shall be invested 
in the same manner as is provided in this subchapter for the in- 
ifestment of the capital stock of certain insurance companies. The 
stockholders of the guaranty capital of a company or owners of 
^aranty surplus are entitled to a semiannual dividend of not 
more than three and one-half per centum on their respective 
shares if the net profits or unused premiums left after all ex- 
penses, losses, and liabilities then incurred, together with the 
reserve for reinsurance, as provided for, are sufficient to pay the 
same. The guaranty capital or surplus shall be applied to the 
payment of losses only when the company has exhausted its cash 
in hand and the invested assets, exclusive of uncollected pre- 
mimns, and when thus impaired, the directors may make good the 
whole or any part of it by assessments upon the contingent funds 
of the company at the date of such impairment. Shareholders 
and members of such companies are subject to the same provisions 
of law in respect to their right to vote as apply respectively to 
shareholders in atock companies and policyholders in purely 
mutual companies. This guaranty capital or surplus shall be 
retired when the permanent fund of the company equals two per 
centum of the amount insured upon all policies in force, and may 
be reduced or retired by vote of the policyholders of the company 
and the assent of the insurance commissioner, if the net assets 
of the company above its reinsurance reserve iind all other claims 
and obligations, exclusive of guaranty capital or surplus, for two 
years immediately preceding and including the date of its last 
amiual statement, is not less than twenty-five per centum of the 
guaranty capital or surplus. Due notice of such proposed action 
on the part of the company must be mailed to each policyholder 
of the company not less than thirty days before the meeting when 
the action may be taken, and must also be advertised in two 
papers of general circulation, approved by the inauranca ,com- 

r.,u:..J.y,.C.O()gIe 



352 North Carolina Corporation Code 

miasioBer, not less than three times a week for a period of not 
less than four weeks before such meeting. No insurance company 
with a guaranty capital or surplus, which has ceased to do new 
business, shall divide to its stockholders any part of its assets or 
guaranty capital or surplus, exc€pt income from investments, 
until it has performed or canceled its policy obligations. 
C. a, K. 6350; Bev., a. 4740^ 1899, c. S4, a. 34; 1911, c. 196, b. 3. 

746. Dividends and asseBsments; liability of policyholders. 

The directors of a mutual fire insurance company may from time 
to time by vote fix and determine the amount to be paid as a 
dividend upon policies expiring during each year. Each policy- 
holder is liable to pay his proportional share of any assessments 
which are made by the company in accordance with law and bis 
contract on account of losses incurred while he was a member, 
if he is notified of such assessments within one year after the ex- 
piration of his policy. Any mutual fire insurance company doing 
business with a fixed annual premium may in its by-laws and 
policies fix the contingent liability of its members for the payment 
of losses and expenses not provided for by its cash funds; but 
this contingent liability of a member must not be less than a 
sum equal to five times the cash premiums written in his policy 
and in addition thereto. The total amount of the liability of 
the policyholder must be plainly and legibly stated upon the back 
of each policy. Whenever any reduction is made in the con- 
tingent liability of members, it applies proportionately to all pol- 
icies in force. 
C. S., s. 6351; Bev., b. 4741; 1899, e. 34, a. 35. 

746. Mutual and assessment companies and tbeir liability. 
When any policy of insurance is issued by any mutual insurance 
company or association organized under the laws of this state 
and such policy is assigned or pledged as collateral security for 
the payment of a debt, such company or association, by its 
president and secretary or other managing ofBcers, may insert 
in such policy so assigned or pledged, or attach thereto, as a 
rider thereon, a provision or provisions to be approved by the 
insurance commissioner, whereby any or all conditions of the 
policy which work a suspension or forfeiture and especially the 
provisions of the statute which limits such corporation to insure 
only property of its members, may be waived in such cases for 
the benefit of the assignee or mortgagee. In case any such com- 
pany or associatiou shall consent to such assignment of any 
policy or policies, or the proceeds thereof, it may nevertheless 

D,:|,lz.db.CA>O^IC 



North Carolina Corporation Code 353 

Ht any time thereafter, by its president aud secretary or such 
other officer as may be authorized by the board of directors, 
cancel such policy by giving the assignee or mortgagee not less 
than ten days notice in writing: Provided however, a longer 
period may be agreed upon by the company or association and 
meh assignee or mortgagee. And the president and secretary 
of such company or association, with the approval of the in- 
surance commissioner, may agree with the assignee or mortgagee 
upon an assessment or premium to be paid to the insurer in case 
the insured shall not pay the same, which shall not be less than 
BDch a rate or sum of money as may be produced by the average 
assessments or premiums made or charged by like company or 
assoeiation during a period of five years next preceding the 
year of such agreement and assignment. When an assignment is 
made as herein provided the policy or policies so assigned or 
pledged, subject to the conditions herein, shall remain in full 
force and effect for the benefit of the assignee or mortgagee, 
notwithstanding the title or ownership of the assured to the 
property insured, or to any interest therein, shall be in any 
manner changed, transferred or encumbered. 
C. 8., B. 6351-a: 1920. c. 79, 

747. Guanuity against assessments prohibited. If any director 
or other ofiBeer of a mutual fire insurance company, either . 
oflSeially or privately, shall give a guarantee to a policyholder 
thereof against an assessment to which such policyholder would 
otherwise be liable, he shall he punished by a fine not exceeding 
one hundred dollars for each offense. 

C. 8,, a. 6352; Rpv., a. 3496; 1899, e. 54, b. 100. 

748. Manner of making assessments; rights and liabilities of 
policyholders. When a mutual fire insurance company is not 
possessed of cash funds above its reinsurance reserve sufficient 
for the payment of insured losses and expenses, it must make an 
assessment for the amount needed to pay such losses and ex- 
penses upon its members liable to assessment therefor in pro- 
portion to their several liabilities. The company shall cause to 
be recorded in a book kept for that purpose the order for the 
assessment, together with a statement which must set forth the 
condition of the company at the date of the order, the amount 
of its cash assets and deposits, notes, or other contingent funds 
liable to the assessment, the amount the assessment calls for, 
and the particular losses or liabilities it is mad^ to provide for. 
This record must be made and signed by the directors who ^otecLj,, 



354 North Carolina Corporation Code 

for the order* before any part of the asseasment iB collected, and 
any person liable to the assessment may inspect and take a copy 
of the same. When, hy reason of depreciation or loss of its funds 
or otherwise, the cash assets of such company, after providing 
for its other debts, are less than the required premium reserve 
upon its policies, it must make good the deficiency hy assessment 
in the manner ahove provided. If the directors are of the opinion 
that the company is liable to become insolvent they may, instead 
of such assessment, make two assessments, the first determining 
what each policyholder must equitably pay or receive in case 
of withdrawal from the company and having his policy canceled ; 
the second, what further sum each must pay in order to reinsure 
the unexpired term of his policy at the same rate as the whole 
was insured at first. Each policyholder must pay or receive 
according to the first assessment, and his policy shall be canceled 
unless he pays the sum further determined by the second assess- 
ment, in which case his policy continues in force; but in neither 
case may a policyholder receive or have credited to him more than 
he would have received on having his policy canceled by a vote 
of the directors under the by-laws. 

C. S., s. 6353; Rev., b. 4742; 1899, c. 54, m. 36, 37. 

Uandarons § ise. Where, after judgmpnt osainst a niutu.il Are insurnuce 

• company in an action on a policy, it rofuses to make no anaessment on its 

members necessary in order to raise funds witli whivli to pay tbe judgment, 

the policyholder mnv have mandamus to compel such nasessment. — ^Perry 

V. Farmers' Mut. Fire Ina. Co., 132 N. C. 283, 43 S. E. 837. 

Insurance g 181. Where tlie mombera of mutual insurance companies 
have enjoyed th« protection which membership affords, they cannot, after 
a loss has been sustained, nithdraw and refuse to pay their portion of the 
loss.— Perry v. Farmers' Mutual Fire Ina. Co., 139 N. C. 374, 51 8. E. 1025. 

Insurance 8125. AH contracts and by-lawa of an incorporated sorictj 
are made with reference to the general Inn, and they must conform to 
certain general requirements in reapect to vested personal and proi>erty 
rights of members.— Sherrod v. Farmers' Mutual Firo Ins. Co., 139 X. C. 
167, 51 S. E. 910. 

749. Mutual life and health companiefi. Life and health in- 
surance companies and associations organized in this state to 
do business on the mutual plan shall be governed as to the com- 
mencement of business, election of members, guaranty capital, 
dividends, and assessments as provided in this article for mutual 
fire insurance companies, where applicable. 

0. S., B. 6354; Rev., b. 4743; 1903, c. 536, s. 1. 

750. IHviden^ on, and redemption of, guaranty capital of life 
companies. The stockholders of the guaranty capital of any 



NOHTH GABOLINA CORPORATION CODE 356 

domestic life iasnrance cotnpan; are entitled to Hoch annual 
diTidends not exceeding eight per centum, payable from the net 
snrplus, as have been agreed upon in the Hubscription thereof. 
Snch company may redeem its guaranty capital by appropriation 
of net snrplua for that purpose whenever its members so vote. 

C. 8., B. 635S; Bev., a. 4744; 18W, e. 54. a. 58; 1903, e. 436, a. 6. 

AET. 9. ASSESSMENT COMPANIES. 

761. Copies (rf charter and by-laws filed. Every corporation, 
society, or organization of this or any other state or country, 
transacting business under this department upon the co-operative 
or assessment plan, must file with the insurance commissioner, 
before beginning to do business in this state, a copy of its 
charter or articles of association, and the by-laws, rules, or regu- 
lations referred to in its policies or certificates and made a part 
of such contract. By-laws or regulations not so filed with the 
insurance commissioner will not avoid or affect any policy or 
certificate issued by such company or association.' 

C. 8., I. 6356; Rev., a. 4TS0; 1899, c. 54, a. 86. 

See Brenizer v. Royal Arcanum, 141 N. C. 409, 53 8. E. 835. 

762. Contracts most accord with charter and by-laws. Every 
policy or certificate or renewal receipt issued to a resident of 
this state by any corporation, association, or order transacting 
therein the business of insurance upon the assessment plan must 
be in accord with the provisions of the charter and by-laws of 
such corporation, association, or order, as filed with the insurance 
commissioner. It is unlawful for any such domestic or foreign 
insurance company or fraternal order to transact or offer to 
transact any business not authorized by the provisions of its 
charter and the terms of its by-laws, or, through an agent or oth- 
erwise, to offer or issue any policy, renewal certificate, or other 
contract whose terms are not in clear accord with the powers, 
terms, and stipulations of its charter and by-laws. 

C. 8., 8. 6S57; Hev., a. 4791; 1899, c. 54, a. 84; 1903, r. 438, s. 9. 

Insnisnce g'MEI. Store no law protiibita fraternal benetit society from 
railing ita rates, but above sertion makea aueh contracts aubjoet to the 
charter and by-lawa of tbe company, a Massachusetts comjiany, whose 
tharter and by-lawa permit, may raise the rate of a North C.iroliun mem- 
ber. — Hollingsworth v. Supreme Council of the Royal Arcanum, 175 N. C. 
S15, S6 8. E. 81. 

753. "Assessment plan" printed on application and policy. 
Every policy or certificate issued to a resident of the state by 

r,„„z.dD,.C.003le 



366 North Carolina Corporation Code 

any corporation transacting in the state the business of life 
insurance upon the assessment plan, or admitted to do business 
in this state on the assessment plan, shall print in bold type and 
in red ink, near the top of the front page of the policy, upon 
every policy or certificate issued upon the life of any such resi- 
dent of the state, the words "issued upon the assessment plan" ; 
and the words "assessment plan" shall be printed conspicuously 
in red ink in and upon every application, circular, card, and any 
and all printed documents issued, circulated, or caused to be 
circulated by such corporation within the state, save and except, 
however, in advertising in newspapers within the state, in which 
case the words may be printed in black. 
C. S., s. 6358; 1913, t. 159, b 1. 

754. Revocation for non-compliance. If any corporation or as- 
sociation transacting insurance business in this state on the 
assessment plan or issuing any policy upon the life of a resident of 
North Carolina upon the assessment plan shall fail or refuse 
to comply with the foregoing section, the insurance commis- 
sioner shall forthwith suspend or revoke all authority of such 
corporation or association and of its agents to do business in this 
state. 

C. S., i. OSSQ; 1913, r. 159, s. 2. 

756. Deposits and advance assessments required. Every domes- 
tic insurance company, association, order, or tratern^ benefit 
society doing business on the assessment plan shall collect and 
keep at all ' times in its treasury one regular loss assessment 
sufficient to pay one regular average loss ; and no such company, 
association, order, or fraternal benefit society shall be licensed 
by the insurance commissioner unless it makes and maintains ^th 
him for the protection of its obligations at least five thousand 
dollars in United States or North Carolina bonds, in farm loan 
bonds issued by federal loan banks, or in the bonds of some eity, 
county, or town of North Carolina to be approved by the in- 
surance commissioner, or deposit with him a good and sufficient 
bond, secured by a deed of trust or real estate situate in North 
Carolina and approved by him; but this shall not apply to com- 
panies, associations, or orders doing business in not more than 
two adjacent counties. Such companies, associations, orders, or 
societies now doing business in this state and not issuing policies 
or certificates for more than two hundred dollars, shall be per- 
mitted to deposit five hundred dollars on the first day of July, 

touvj.... Cookie 



North Carolina Corporation Code 367 

one thousand nine btmdred and thirteen, and five hundred dollars 
each siz months thereafter until the required amount is deposited ; 
sad the last named association when hereafter organized may be 
allowed by the insurance commissioner to make such deposit in 
like installments. The insurance commissioner may increase 
the amouut of deposit to the amount of reserve on the contracts 
of the associatioa or society. 
C. a, 8. 6360; Eev., a. 4793; 1913, c. 119, i. 1; 1917, c. 191, 8. 2. 

756. Deposits by foreign assessment companies or order. Each 
foreign insurance company, association', order, or fraternal bene- 
fit society doing business in this state on the assessment plan 
shall keep at laU times deposited with the insurance commis- 
sioner or in its head ofBce in this state, or in some responsible 
banking or trust company, one regular assessment sufficient to 
pay the average loss or losses occurring among its members in 
this state during the time allowed by it for the collection of 
assessments and payment of losses. It shall notify the insurance 
commissioner of the place of deposit and furnish him at all 
times such information as he requires in regard thereto; and 
no such company, association, order, or fraternal benefit society 
shall be licensed by the commissioner unless it makes and main- 
tains with him for the protection of its obligations at least five 
thousand dollars in United States or North Carolina bonds, in 
farm loan bonds issued by Federal land banks, or in the bonds of 
some county, city, or town in North Carolina to be approved by 
the insurance commissioner, or a good and sufficient bond or note, 
secured by deed of trust on real estate situate in North Carolina, 
and approved by the commissioner. The provisions of this section 
do not apply to associations, orders, or fraternal benefit societies 
operating in not more than two adjacent counties in the state 
and paying a benefit of not exceeding two hundred dollars, hut 
the amount to be deposited by said societies is within the dis- 
cretion of the insurance commissioner, but must be not less than 
one hundred dollars. 

. 54, B. 84; 1903, c. 438, s. B; 1913, 

757. Kevocatlon of license. If any such corporation, associa- 
tion, or order at any time fails to comply with the provisions' of 
the two next preceding sections or shall issue policies or certifi- 
cates not in accord with its charter and by-laws, as provided in 
this article, the insurance commissioner shall forthwith suspend 

DidilzedbyCoO^IC 



868 NoiCth Carolina Coepobation Code 

or revoke all authority to it, and of all ita agenta or ofiScers, to 
do busineHs in this state, and shall publish such revocation in 
some newspaper published in this state. 

C. 8., a. 63^2; Bev., a. 4793^ 1899, c. 54, a. 85. 

ART. 10. BOND AND INVESTMENT COMPANIES 
"BLUE SKY LAW." 
758. License required; amount of capita stock. Before an; 
bond, investment, dividend, guarantee, registry, title guarantee, 
debenture, or other like company (not strictly an insurance com- 
pany as defined in this chapter), or any individual, corporation, or 
partnership who, by agents, offers for sale or sails the stocks, 
bonds, or obligations of any foreign corporation, whether or- 
ganized or to be organized or being promoted, may be authorized 
to do business in this state, such company, individual, or part- 
nership must be licensed by the insurance commissioner; and the 
commissioner is authorized to issue such license when he is 
satisfied that such company or corporation is safe and solvent, 
and has complied with the laws of this state applicable to fidelity 
companies and governing their admission and supervision by 
the insurance department. If such company is chartered - and 
organized in this state and has its home office within the state, 
and is solvent to the extent of at least fifteen thousand dollars, 
it may, if a stock company, commence business with a ca.pital 
stock of twenty-five thousand dollars. The license issued to such 
companies and their agents shall be issued and paid for as pro- 
vided for those of insurance companies. This section shall apply 
also to every corporation, company, co-partnership, or association 
organized or to be organized in this state where st^ch compan^r or 
organization by its organizers or promoters puts or proposes to 
put the stock of the company on the market in person or by 
agents. 

C. S., 8. 6363; Rev., a. 4805; 1899, c. 54, a. 87; 1901, e. 706, 's. 2; ISll, «. 
196, s. 4; 191B, c. 121. 

Commerce §69. It ia within the police power of the state to require a 
licenae from foreign corpoTations whieh seek to <lo business within the state 
by Belling therein their obligations, evideneea of property and acreaBe^in 
another atate, the transaction being entirely consummated within one state 
and not being interstate commerce.— State v. Agey, 171 N. C. 831, 88 S. E. 
726. 

OorporatlonB §636. There is nothing in either the federal or atate con- 
stitation which prohibits the state, in the exercise of ita police power, in 
order to prevent fraud and iiii|>09ition, from requiring a license frota for- 
eign corporations for doing business in the state. — Ibid. 



DidilzedbyCoO^IC 



NOETH Carolina Cobpokation Code 859 

CorpDnUoiu g US. Foreign corporatioDS offering fig orchsids for sale 

[ewmng title until final payment held required to procure license from 
■ * er.— Ibid. 



FilnclpBl A Snrety g 153. Service of process npon 
tor foreign bonding company is not r — '"' --'- ' 
Abaher, 174 N. C. 676, 94 8. E.- 414. 



for foreign bonding company is not required under ttiis section. — Pardua v 

174 N. r — -■'•'• ■•■ 



759. Foreign companies subject to re^nlation of this article. 
Every corporation, partnership, or asaociation, all of which are 
in this article termed company, organized, proposed to be or- 
ganized, or which shall hereafter be organized, without this 
state, whether incorporated or unincorporated, which shall in 
tbis state sell, or negotiate for sale, any stocks, bonds, or other 
evidences of property or interest in itself or any other company, 
all of which are in this article termed securities, upon which sale 
OP proposed sale the whole or any part of the proceeds are used, 
or to be used, directly or indirectly, for the payment of any com- 
mission or other expenses incidental to the organization or pro- 
motion of any such company, shall be subject to this article. 
The provisions of this article shall apply to a private owner 
selling stock in a foreign corporation, but only so far as it shall 
be necessary for him to satisfy the insurance commissioner that 
si^ch sale is made or is offered to be made in good faith and with- 
out intent to evade the provisions of this article. 

C. a, 8. 6364; 1913, e. 156, s. 1 (1); 1B21. 

760. Docmneotg to be filed with conuniflsioner; license issued. 
Before offering or attempting to sell any such securities to any 
person or persons, doing or offering to do any business whatever 
in this state, excepting that of preparing the documents herein- 
after required, every such company shall file in the ofBce of the 
insurance commissioner of this state, together with the fees pre- 
scribed for fidelity companies, the following documents, to wit: 
A statement showing in full detail the plan upon which its pro- 
poses to transact business; a copy of all applications for and 
forms of contracts, securities, bonds, or other instruments, which 
its proposes to make with or sell to its contributors; a statement 
which shall show the name, location, and head office of the com- 

. pany and an itemized account of its actual financial condition, 
and the amount of its property and liabilities, and such other 
information, and in such form, touching its affairs as said officer 
may require. It shall also file with the insurance commissioner 
a copy of the laws of such state, territory, or government under 

" " " arter 

.Ot>Q 



360 North Carolina Cobporation Code 

of its home state and certificate of the proper officer of such state 
that it is authorized to do business therein, articles of incorpora- 
tion, constitution, and by-laws, and all amendments thereof which 
have been made, and all other papers pertaining to its organiza- 
tion, and enter into an agreement as a condition precedent to be- 
ing licensed that stock or other offerings shall be sold only for 
cash or for notes or bonds payable to the company, and that said 
notes or bonds will not be sold or discounted With an indor8^ 
ment "without recourse" or obligation not to be responsible for 
the same by the owner in a general sale or canvass, or by an agcDt 
on salary or commission. Before doing business in this state 
it must be licensed by the insurance commissioner, which the 
commissioner is authorized to do when he is satisfied that such 
company or corporation is safe and solvent, and has complied 
with the laws of this state applicable to fidelity companies and 
governing their, admission and supervision by the insurance de- 
partment. 
C- S., s. 6365; 1913, e. 156, a. 1 (2); 1921, p. 233. 

761. Advertisiiig mattca' reg^ulated. N'o advertisement, pamphlet, 
circular, or other document shall be issued, circulated, or de- 
livered by such company or its agent, within this state, unless 
the same shall bear a serial number, and a copy thereof shall first 
have been filed with the insurance commissioner, nor after such 
company has been notified of objection thereto by said officer. 

C. «.. M. 6366; 1913, c. 156, 8. 1 (3). 

762. Contract in writing; stipulations required. No person, 
for the purpose of organizing or promoting any company, or pro- 
moting the sale of securities of such company by it after organiza- 
tion, as principal or agent, shall sell or agree or attempt to sell 
within this state any securities in such company unless the 
contract of subscription or of sale shall be in writing and contain 
a provision in the following language : 

"No sum shall be used for commission, promotion, and or- 
ganization expenses on account of any share of stock in this com- 
pany in excess of one per cent of the amount actually paid upon 
separate subscriptions (or in lieu thereof may be inserted, or 
one dollar per share from every fully paid subscription) for such 
securities, and the remainder of such securities shall be held or in- 
vested as authorized by the law governing such company and 
held by the organizers (or trustees as the case may be), and the 
directors and officers of such company after organization, bi 
bailees for the subscriber, to be used only in the conduct of the 



NOBTH Carolina Cobpobation Code 361 

bwess of such company after baTing been licensed and au- 
thorwed therefor by proper authority." 

f S^ ■. 6367; 1913, c. 156, a. 1 (4). 

M. Funds deposited until license granted. Funds and se- 
(Unties held by such organizers, trustees, directors, or officers as 
Itilees shall be deposited with any bank or trust company of 
iliis state until such company has been licensed to do business. 
C. S., B. 6367; 1913, c. 156, 8. 1 (4). 

764. Name of person interested to appear in contract. No 
person shall participate in, receive, or accept any part or promise 
of iny part of any of the commissions or rewards of any organizer, 
promoter, or agent for the sale of any such securities, unless the 
name of such person and the fact of his interest in such com- 
misBJODS or rewards shall appear upon such contract of sub- 
sription. The omission of such statement from any such con- 
tract shall, in addition to the penalty herein provided, make such 
person liable to the purchaser or his assignees for all sums paid 
by such purchasers, with interest at the legal rate from date of 
pigment, upon the assignment or tender of assignment of the 
Mcnrities so purchased. 

a 8., a. 636S; 1913, c. 156, b. 1 (5). 

765. Examination 1^ commissioner; license. The insurance 
eommissioner has power to make examination of said company 
A its expense, including actual expenses and the per diem 
of examiners twenty-five dollars, and to require such further 
information as he may deem advisable, and if he shall find that 
tie provisions of the law have been complied with, and is satisfied 
tlut the company is safe and solvent, and that its business is 
proper and legitimate and is so conducted, he may license the 
company to transact business in the state upon the payment o£ 
1 license fee of two hundred dollars; and no such company or 
representative thereof shall transact or offer to transact business 
vithin this state unless a license has been issued to it to do so. 
The license shall recite in bold type that the insurance commia- 

j ffloner in no wise recommends the securities to be offered for sale 
h such company. 
C. a, I. 6S70; 1913, c. 156, b. 1 (G); Ei. Seas. 1920, c. 1, 8. 7-i. 

766. Ohanges in organisation or plans filed with commissioner. 

No EDch company shall transact, or offer to transact, any business 
within this state during any time after the adoption of any 
Aaagi in its articles of oi^;anization, by-laws, or plan of doi^g 



362 North Carolina Corporation Code 

business, or the making of any change in the form of its applica- 
tions, or other contracts, before the same shall- have been filed 
with the insurance commissioner. 
C. 8., s. 6371; 1913, c 156, ■. 1 (7). 

767. Agents must be licensed; bond required. No person shall 
transact or offer to transact business in this state as agent for 
such company, or transact or offer to transact any businesa de- 
scribed in this article unless such person shall hold a license 
issued by the msurance commissioner and no license shall issue 
to any person who is not a resident of the State of North Carolina, 
and has not been a bona fide resident for at least two years prior 
to the date when such application for license is filed with the 
insurance department. The license shall issue only upon the 
filing with the insurance commissioner by such agent of a bond 
in the sum of one thousand dollars ($1,000), with such conditions 
and sureties as may be required and approved by the insurance 
commissioner. The License shall expire on the first day of April 
following, unless the authority is sooner revoked by the insurance 
commissioner, and such authority shall be subject to revocation at 
any time by such officer for cause appearing to him sufBcient. 
The fee for such agent's license shall be the same as prescribed 
for fidelity companies. 

C. S., 8. 6372; 1913, c. 156, s. 1 (8); Ex. Seas. 1920, <-. 74. 

768. Statemeots filed; acooonts kept. Every company shall, 
on or before the first day of March, file with the insurance com- 
missioner a statement as of the thirty-first day of December pre- 
ceding, in such form as required by him, and such other state- 
ments and information shall be filed in such form and within such 
time as may be required by the commissioner. The accounts of 
such company shall be kept in such form as required by the 
commissioner. 

C. S., H. 6373; 1B13, e. 186, a. 1 (9). 

769. Kevocation of license. No such company shall fail to 
comply with any provision of the law or any requirement of the 
insurance commissioner pursuant to the law, and no officer, agent, 
or employee of any such company shall make or cause to be made 
any false statement in any report required of him, or a false 
entry in any book of such company, or shall make or publish any- 
false statement of its condition or regarding its securities; and 
upon any violation of this section the insurance commissioner may- 
revoke its license to do business in this state. 

- C. S., 1. 637*; 1913, c. ISG, a. 1 (101. 

DiyilzcdbvCoOglC 



North Casolina Corpobation Code 363 

770. Pnnishment for violation. Any officer or agent of such 
company knowingly or wilfully violating any of the proTisions 
of this article shall be punished by a fine not exceeding two hun- 
dred dollars, or by imprisonmeht in jail or worked on the roads 
for not exceeding two years, or by both such fine and imprison- 
ment. 

a 8., 8. 6375; 1913, c. 156, s. 1 (11). 

ART. 11. FIDELITY INSURANCE COMPANIES. 

771. May act as fiduciaries. Any corporation licensed by the 
insurance commissioner, where such powers or privileges are 
granted it in its charter, may be guardian, trustee, assignee, 
receiver, executor or administrator in this state without giving 
any bond ; and the clerks of the superior courts or other officers 
charged with the duty, or clothed with the power of making such 
appointments, are authorized to appoint such corporation to 
any snch office, whether the corporation is a resident of this state 
or not. 

C. S., B. 6376; Bev., s. 4709i 1BB9, e. 54, a. 47^ 1903, c. 438, s. 5. 

772. License to do bosiness. Before any such corporation is 
authorized to execute any bond, obligation, or undertaking, or 
act in any fiduciary capacity without bond, it must be licensed by 
the insurance commissioner of the state, which the commissioner 
is authorized to do when satisfied that such company or corpora- 
tion is safe and solvent and has complied with the laws of this 
state applicable to such companies, and if a foreign company, 
that it has also complied with the conditions, rules, and regula- 
tions governing the admission of foreign insurance companies to 
do business in this state. 

C. S., s. 6377; Bev., a. 4800; 1890, c. 54, b. 46; 1901, c. 706, s. 1. 

773. Ezamination as to solvency. The commissioner shall 
examine into the solvency of such corporation, and shall, if he 
deem it necessary, at the expense of the corporation, make or 
cause to be made an examination at its home office of i:ts assets 
and liabilities. 

C. 8., H. 6378; Bev., s. 4801; 1899, c. 54, b. 46; 1901, c. 706. 

774. Certifloate of solvenqr equivalent to justification. After 
any such corporation has been licensed by the commissioner, 
the certificate of the commissioner that it has been admitted to 

do business in the state and is licensed by the insurance eomnji^-^o[l_; 



364 North Carolina Corpobation Ck)DB 

sioner and is solvent to an amount not less than one hundred 
thousand dollars, shall be, until revoked by blm, equivalent to 
the justification of sureties, and full evidence of its authority to 
give such bonds or undertakings. There shall be no charge for the 
seal of this certi£cate. 

C. a, s. 6379; Rev., a. 4802; 1899, c. 54, s. 46; 1901, c. 70S. 

776. OiBTk of superior court notified of license and revocation. 

The insurance commiasioner, upon granting license to any such 
corporation, shall immediately notify the clerk of the superior 
court of each county in the state that such corporaltion has been 
licensed under this chapter; and whenever the commissioner is 
satisfied that any corporation licensed by him has become insol- 
vent, or is in imminent danger of insolvency, he shall revoke 
the license granted to it, and notify the clerk of the superior 
court of each county of such revocation; and after auch notifica- 
tion the right of such corporation to hold any office, or be surety 
on any bond, as permitted by this chapter, ceases. 
C. S„ B. 6380; Rev., a. 4803; 1899, f. 54, a. 50. 

776. Besident agents required. All business done in this state 
by any fidelity insurance company must be done through regularly 
authorized agents residing in this state, or through applications 
of such agents ; and all policies so issued must be countersigned 
by such agents. 

C. S., 8. 6381; Eev., s. 4804; 1899, e. 54, s 108; 1903, c. 438, a. 11. 

777. Limitation of liabili^ assumed. No fidelity or surety 
company shall incur in behalf or on account of any one person, 
partnership, association, or corporation a liability for an amount 
larger than one-tenth of its assets, unless it shall be secured 
from loss thereon beyond that amount by suitable and sufficient 
collateral agreements of indemnity, by deposit with it in pledge 
or conveyance to it in trust, for its protection, of property equal 
in value to the excess of its liability over such limit ; or, if such 
liability is incurred in behalf or on account of a fiduciary holding 
property in a trust capacity, by such deposit or other disposition 
of a suitable and sufiicient portion of the estate so held that no- 
further sale, mortgage, pledge, or other disposition can he made 
thereof without such company's approval, except by the decree 
of a court having proper jurisdiction. If any company violates 
the provisions of this section, the insurance commissioner may 
revoke its authority to do business in the state. 

C. S.. B. 6382; Iflll, c. 38. DiyiizcdbvCoOQlc 



North Cabolina C<»pokation C<h>e 366 

abt. 12. promoting and holding companies. 

778. Terms defined. As the terms are used in this article, 
"promoting corporation" means a corporation or joint-stoek 
association, engaged in the business of organizing or promoting or 
endeavoring to organize or promote the organization of an in- 
surance corporation or corporations, or in any way assisting 
therein; "holding corporation" means a corporation or joint- 
stock association, which holds or is engaged in the acquisition 
of the capital stock or a major portion thereof of one or more 

, insurance corporations for the purpose of controlling the man- 
agement thereof, as voting trustee or otherwise; and "securities" 
means the shares of capital stock, subscnption, certificates, de- 
benture bonds, and any and all other contracts or evidences of 
ownership of or interest in insurance corporations, or in pro- 
moting or holding corporations. 
C. a, B. 6383; 1913, c. 182. a. 1. 

779. Certificate required. No individual, partnership, associa- 
tion, or corporation, as the agent of another or as a broker, shall 
sell or offer for sale, or in any way assist in the sale in this state 
of the securities of any promoting or holding corporation, or of 
any insurance corporation, which is not at that time lawfully 
engaged or authorized to engage in the transaction of the busi- 
ness of insurance in this state, without first procuring, as here- 
inafter provided, a certificate of authority from the insurance 
department to sell such securities; nor shall any individual, 
partnership, association, or corporation sell or oflEer for sale in 
this state the securities of any promoting or holding corporation, 
or of any insurance corporation which is not at the time of such 
sale or ofifer of sale lawfully engaged or authorized to engage in 
the transaction of the business of insurance in the state, unless 
such corporation has first procured from the insurance commis- 
aiODcr, as hereinafter provided, a certificate that the corporatioL 
has fully complied witli the provisions of this article, and is au- 
thorized to sell the securities. Every certificate issued by the in- 
surance commissioner pursuant to the provisions of this article 
shall state in bold type that the commissioner in no way recom- 
mends the securities thereby authorized to be sold, and shall be 
renewable annually, upon written application, filed on or before 
the first day of April of each year, and may be revoked for cause 
at any time by the commissioner. The commissioner shall pi^t 



ill pre-r 



366 North Carolina Corporation Code 

pare and furnish upon request suitable blank forms of application 
for tlie certificates required by this article. 
C. a., a. 6384; 1013, e. 182, s. 2, 

780. Application for cartillcate by agent. Every individual, 
partnership, association, or corporation desiring or intending to 
sell or to offer for'sale in this state the securities of insurance 
corporations or of any holding or promoting corporations shall file 
with the insurance commissioner an application for a certificate 
of such authority. This application must contain a statement, 
verified by oath, setting forth the name and address of the appli- 
cant, previous business experience, date and place of birth or or-* 
ganization and such other information as the commissioner re- 
quires. It is the duty of the commissioner to examine the applica- 
tion and to make any further inquiry or examination of the appli- 
cant as he deems advisable. If upon examination the commissioner 
finds the applicant, or if a corporation, the officers and directors 
thereof, to be trustworthy persons of good business credit, he 
may issue to the applicant a certificate of authority to sell or offer 
for sale in this state the securities of any insurance corporation, 
and of any promoting or holding corporation previously author- 
ized under this article, which shall be mentioned therein. 

C. S., s. 6385; 1913, c. 182, s. 3. 

781. Application for certificate by coiporation. Every such 
unauthorized insurance corporation, and every promoting or 
holding corporation, whose securities are offered for sale in this 
state, must file with the insurance commissioner copies of all se- 
curities to be offered for sale, and an application for certificate 
of authority under this article which shall contain a statement in 
detail of the plans and purposes of such corporation, the amount 
and par value of the securities to be offered for sale, and the sell- 
ing price thereof, the manner in which the money paid in therefor 
is to be spent or employed, the rate of commission to be paid for 
the sale of such securities, the salaries to be paid to the officers of 
such corporation, and such other information as the insurance 
commissioner requires. No change shall thereafter be made in the 
form or character of the securities to be offered for sale, or in the 
plans or purposes of any such corporation, without the approval 
thereof in writing by the commissioner. It is the duty of the 
commissioner to examine the application and other documents 
filed, and to make any further inquiry or examination of the cor- 
poration as he deems advisable. If upon examination the com- 

r finds that the plans and purposes of the corporation are 



NCHtTH CABOUNA COEPOBATION COOE 36^;; 

proper, that its conditioD is satisfactory, that the amount of its 
securities Is reasonable, that the price at which such securities are 
to be sold is adequate, and that the manner in which the money 
paid in therefor, the rate of commissions to be paid and the nala- 
ries of oflScers are fair, he may issue a certificate that the corpora- 
tion has complied with all the provisions of this article, and is 
lathorized to sell or offer its securities for sale in this state. 
C. S., 8. 6386; 1913, c. 182, e. 4. 

782. Approval of adTertiaing matter; misrepresentation. No 
printed matter may be used in connection with the sale of se- 
curities of any such promoting, holding, or insurance corporation, 
for advertising purposes, or in the dissemination of information 
with reference thereto, unless it is first submitted to the insur- 
ance commissioner and approved by him in writing. No such 
corporation, and no officer, director, or agent thereof, or any other 
person, copartnership, association, or corporation may issue, cir- 
culate, or employ or cause or permit to be used, issued, circulated, 
or employed any circular or statement, whether printed or oral, 
misrepresenting or exaggerating the earnings of insurance cor- 
porations or the value of their corporate stock or other securi- 
ties, or the profits to be derived either directly or indirectly from 
the organization and management of insurance corporations, or 
of organizing or holding corporations. No insurance or other 
corporation, and no individual, copartnership, or association 
transacting business in this state shall place or offer to place in- 
surance in any corporation in connection with the. sale or pur- 
chase of the securities of any insurance corporation or of any pro- 
moting or holding corporation. 
C. S., s. 6387; 1013, e. 182, t. 6. 

ART. 13. BATE-MAKING COMPANIES. 

783. iDfoTTnation to be filed with insurance commissioner. 
Every corporation, association, board, or bureau which now exists 
or hereafter may be formed, and every person who maintains, or 
hereafter may maintain, a bureau or office for the purpose of sug- 
gesting, approving or making rates to be used by more than one 
underwriter for insurance, including surety bonds, on property 
or risks of any kind located in this state, shall file with the in- 
surance commissioner a copy of the articles of agreement, asso- 
ciation, or incorporation and the by-laws and all amendments 
thereto under which such person, associfttiou, or bureau operates 



sdbyCoO^IC 



868 NoBTH Carolina Coepoeation Code 

or proposes to operate, together with his or its business address 
and a list of the members or insurance corporations represented 
or to be represented by him or it, as well as such other informa- 
tion concerning such rating organization and its operations as 
may be required by the insurance commissioner. 
G. 8., B. 63SS; 1913, e. 145, s. 1; 1915, e. 166, a. 8. 

784. Examination by insurance commissioner; reports. Every 
such person, corporation, association, or bureau, whether before 
or after the filing of the information specified in the preeedinp 
section, shall be subject to the visitation, supervision, and exami- 
nation of the insurance commissioner, who shall cause to be made 
an examination thereof as ofteu as he deems it expedient, and at 
least once in three years. For such purpose he may appoint as 
examiners one or more competent persona, and upon snch es« rui- 
nation he, his deputy, or any examiner authorized by him filiall 
have all the powers given to the insurance commissioner, his 
deputy, or any examiner authorized by him by law, including the 
power to examine under oath the officers and agents and all per- 
sons deemed to have material information regarding the business 
or manner of operation by everj/ such person, corporation, asso- 
ciation, bureau, or board. The insurance commissioner shall 
make public the results of such examination, and shall report to 
the legislature in his annual report on the methods of such rating 
organization and the manner of its operation. 

p. 8., s. 6389; 1913, c. 115, 8. 2. 

785. Schedule of rates filed. Every such person, corporation, 
association, or bureau, as well as every insurance company doing 
business in the state, shall file with the insurance commissioner, 
whenever he may call therefor, any and every schedule of rates 
or such other information concerning such rates as may be sug- 
gested, approved, or made by any such rating organization for 
the purposes specified in section 6388 (herein 783), or by such 
company for its own use. 

C. S., a. 6390; 1913, c. 145, b. 3; 1915, c. 166, a. 8. 

786. Certain conditions forbidden; no discrimination. No such 
person, corporation, association, or bureau shall fix or make any 
rate or schedule of rates which is to or may apply to any risk 
within this state, on the condition that the whole amount of in- 
surance on such risk or any specified part thereof shall be placed 
at Bueh rates, or with the members of or subscribers to such rat- 
ing organization ; nor shall any such person, association, or oor- 



sdbyCoO^IC 



North Carolina Corpobation Code 369 

poration authorized to transact the busmess of insuraoGe within 
this state, fix or make any rate or schedule of rates or charge a 
rate which discriminates unfairly between riaks within this state 
of essentially the same hazard, or if such rate be a fire insurance 
rate, which discriminates unfairly between the risks in the appli- 
cation of like charges or credits or which discrimiDates unfairly 
between risks of essentially the same hazards and kaving subatan- 
tially the same degree of public protection against fire. When- 
ever it is made to appear to the satisfaction of the insurance com- 
missioner that such diserimioation exists, he may, after a full 
hearing, either before himself or before any salaried employee of 
the insurance department whose report he may adopt, order such 
discrimination .removed ; and all such persons, corporations, as- 
sociations, or bureaus affected thereby shall inamediately comply 
therewith ; nor shall such persons, corporations, associations, or 
bureaus remove such discrimination by increasing the rates on 
any risk or class of risks affected by such order unless it is made 
to appear to the satisfaction of the insurance commissioner that 
such increase is justifiable. 

C. 8., H. 6391; 1913, e. 145, b. A. 

787. Becord to be kept; hearing on rates. Every such rating 
organization shall keep a careful record of its proccpdings and 
shall furnish upon demand to any person upon whose property 
or 'risk a rate has been made, or to his authorized agent, full in- 
formation as to such rate, and if such property or risk be rated 
by schedule, a copy of such schedule ; it shall also provide such 
means as may be approved by the insurance commissioner 
whereby any person affected by such rate may be heard, either 
io person or by agent, before the governing or rating committee 
or other proper executive of such rating organization on an ap- 
plication for a change in such rate. 

C. 8., a. 6362; 1913, c. 145, s. S. 

788. Hearing on rates before insurance commissioner. Any 

person, firm, or corporation aggrieved by any rating of a fire in- 
surance company, bureau, or board, may file a complaint in writ- 
ing with the insurance commissioner stating in detail the grounds 
upon which the complainant asks relief. The commissioner shall 
set a time, not earlier than seven days after the date of the notice, 
and a place for a hearing upon the complaint. After due hearing 

r„.,,z..J.y,.C.O()gIe 



S70 NOBTH CABOUNA COBPOBATION CODE 

the commissioner shall make a finding as to whether the estab- 
lished rate is excessive or unfair, and shall make such recommen- 
dations as be deems advisable. The finding and recommenda- 
tions in each case shall be made a matter of record, and shall be 
open to public inspection. 
C. 8., a. 6393; 1015, c. 168, b. 8. 

78d. Oertain insurance contracts excepted. This article shall 
not apply to any contract of life insurance, nor to any contract 
of insurance upon or in connection with marine or transportation 
risks or hazards other than contracts for automobile insurance, 
nor to contracts of insurance upon property or risks located ^vith- 
out this state, nor to contracts made by persons, partnerships, 
associations, or corporations authorized to do ^business on the 
mutual or co-operative plan as associations or societies, nor title 
and credit insurance. 

C. S., B. 6394; 1913, e. 145, b. 6. 

ART. 14. REAL-ESTATE TITLE INSURANCE COMPANIES. 

790. Purposes of organisation. Companies may be formed iu 
the manner provided in this subchapter, with a capital of not leas 
than fifty thousand dollars nor more than two hundred and fifty 
thousand dollars, for the purpose of examining titles to real 
estate, of furnishing information in relation thereto, and of in- 
suring owners and others interested therein against loss by rea- 
son of encumbrances and defective title. Such companies shall 
not be subject to the provisions of this chapter except as regards 
the manner of their formation and as provided in this articlu, 

C. S., H. 6395; Hev., b. 4745; 1899, c. 54, 8. 38; 1901, c. 391, s. 3. 

791. Certificate of authority to do tm^ness. Before any such 
company may issue any policy or make any contract or guarantee 
of insurance, it shall file with the insurance commissioner a cer- 
tified copy of the record or the certificate of its organization in 
the office of the secretary of state, and obtain from the insurance 
commissioner his certificate that it has complied with the laws 
applicable to it and that it is authorized to do business. 

C. S., 8. 630G; Kev., h, 4745; 1899, c. 54, b. 38; 1901, c. 391, s. 3. 

792. Aimual statement and license required. Every such cor- 
poration shall, on or before the thirtieth day of January of each 
year, file in the office of the insurance commissioner a statement, 

DidilzedbyCoO^IC 



NOBTH CABOLINA Ck>SPOBATION CODE 371 

such as he may require, showing its coodition and its affairs for 
the year ending on the preceding thirty-first day of December, 
signed and sworn to by its president or secretary or treasurer and 
one of its directors. For neglect to file sncb annual statement or 
for making a wilfully false statemept it shall be liable to the name 
penalties imposed upon other insnrance companies. The insur- 
ance commissioner shall annually license such companies and 
their agents, and have the same power and authority to visit and 
examine such corporations as he has in the case of other domestic 
insurance companies; and the duties and liabilities of such corpo- 
rations and their agents in reference to such examinations are the 
same as those of other domestic insurance companies. 
C. S., s. 6397; Bev., b. 4745; ie»9, e. 54, s. 38; 1901, e. 391, b. 3. 

ART. 15. FOREIGN INSURANCE COMPANIES. 

793. Admitted to do bnsinesa. Foreign insurance companies, 
upon complying with the conditions herein set forth applicable 
to them, may be admitted to transact in this state, by constittited 
agents resident herein, any class of insurance authorized by the 
laws in force relative to the duties, obligations, prohibitions, and 
penalties of insurance companies, and subject to all laws appli- 
cable to the transaction of such business by foreign insurance 
companies and their agents. 

C. a, a. 6410; Bev., a. 4746; 1899, c. 64, a. 61. 

794 Conditions of admission. A foreign insurance company 
may be admitted and authorized to do business when it : 

1. Deposits with the insurance commissioner a certified copy of 
its charter or certificate of organization and a statement of its 
financial condition and business, in such form and detail as he re- 
quires, signed and sworn to by its president and secretary or 
other proper officer, and pays for the filing of this statement the 
sum required by law. 

2. Satisfies the insurance commissioner that it is fully and le- 
gally organized under the laws of its state or government to do 
the business it proposes to transact; that it has, if a stock com- 
pany, a fully paid-up and unimpaired capital, exclusive of stock- 
holders' obligations of any description, of an amount not less 
than $100,000 (but nothing in this subsection applies to com- 
panies now authorized to do business in this state); and \f)(^Q[(' 



372 North Caeolina Cohporation Code 

mutual company, other than life, that its net cash aaset8 are equal 
to the capital required of like companies on the stock plan; or 
that it possesses net cash assets of not less than $100,000 or net 
cash assets of not less than $50,000, with, also, invested assets of 
not less than $100,000, and ii> each ease with additional contin- 
gent assets of not less than $300,000, and that aucb capital or net 
assets are well invested and immediately available for the pay- 
ment of losses in this state ; and that it insures on any single haz- 
ard a sum no larger than one-tenth of it« net assets. 

3. By a dtily executed instrument filed in his office constitutes 
and appoints the insurance commissioner and his successor its 
true and lawful attorney, upon whom all lawful processes in ao; 
action or legal proceeding against it may be served, and therem 
agrees that any lawful process against it which may be served 
upon such attorney shall be of the same force and validity as if 
served on the company, and that it will not have removed from 
any court of this state to the United States circuit or district 
court any action instituted against it, and that it will not insti- 
tute any action or suit in equity in the United States courts 
against any citizen of this state growing out of, or in any way 
connected with, any policy of insurance issued by it ; and the au- 
thority thereof shall continue in force irrevocable so long as any 
liability of the company remains outstanding in this state. Copies 
of this instrument, certified by the insurance commissioner, are 
sufficient evidence thereof, and service upon such attorney is suf- 
ficient service upon the principal. 

4. Appoints as its agent or agents in this state some resident 
or residents thereof. 

5. Obtains from the insurance commissioner a certificate that 
it has complied with the laws of the state and is authorized to 
make contracts of insurance. If a fire insurance company, it 
must also comply with the provisions of this chapter as to deposits 
and reinsurance by such companies. 

C. S,, a. 6411; Bev., s. 4747; 1899, e. 54, r. 62; 1901, e. 391, B. 5; 1903, c. 
438, e. 6. 

Insurance g 627. Neither a resident of VirgiDia. who is an awignee of 
a policy issued by a New York FOrporation to a citizen of North Carolina, 
which stipulates that it is a New York contract, nor his cause of action 
thereon, is within this section. — Williams v. Mutual Beserve Fund Life 
Asa'n, 145 N. C. 138, 58 B. E. 802. 



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North Carolina Corporation Code 373 

» g22. The power of uttoruey is irrevocable, and in force aa 
long as any liability of such company existed iu the Btati-, tliough the 
rampaoy bad ceased to do busineBS in the state through any local ofBcer 
*r ageot, and service of process against such company thereafter on the 
insurance commissioner was a valid servife. — Biggs v. Mutual Beaervo Fund 
Life Ass'n, 128 N. C. 5. 37 8. E. 055; Mutual Kesi-rve Fund Life Asa'n v. 
Srott, 136 N. C. 167, 48 S. E. 581. 
Section referred to in Brown v. Jackson, 176 N: C. 385, 102 S. E. 73B. 

795. Zdmitation as to classes of business. No insurance com- 
pany admitted to do buRiness in the state may be authorized to 
transact more than one class or kind of insurance therein, unless 
it has the requisite capital for such business engaged in, and ^uch 
a company may undertake two or more of the classes of insurance 
set out in article six, section 6327, of this chapter (herein 721), 
upon providing- for each additional kind at least fifty thousand 
dollars additional' capital. But if life, fire, and credit insurance 
is added to any other line or lines, the additional capital shall he 
one hundred thousand dollars each, and the company shall pay 
the license taxes and fees for each class or kind of insurance pro- 
vided by this chapter. 

C. S., s. 0412; Rev., a. 4748; 1809, c. 54, s. 65; 1901, c. 391, s. 5; 1903, c. 
438, a. 6; 1911, c. Ill, a. 2. 

796. Eeciprocal laws. When, by the laws of any other state 
or nation, any taxes, fines, penalties, licenses, fees, deposits of 
money or of securities, or other obligations or prohibitions are 
imposed upon insurance companies of this state doing business 
in such other state or nation or upon their agents therein, then, 
80 long as such laws continue in force, the same taxes, fines, pen- 
alties, licenses, fees, deposits, obligations and prohibitions, of 
whatever Mnd, shall be imposed upon all such insurance compa- 
nies of such other state or nation doing business within this state 
and upon their agents here. Nothing herein repeals or reduces the 
license, fees, taxes, and other obligations now imposed by the laws 
of this state or to go into effect with the companies of any other 
state or nation unless some company of this state is actually doing 
or seeking to do business in such state or nation. When an in- 
Borance company organized under the laws of any state or country 
is prohibited by the laws of such state or country or by its char- 
ter from investing its assets other than capital stock in the bonds 
of this state, then and in such case the insurance commissioner 
is authorized and directed to refuse to grant a license to trans- 
act business in this state to such insurance company. 

C. S., s. 6413; Rev., s. 4749; 1899, c. 64, s. 71; 1B08, e. BW, a. 11. OC^Ic 



874 North Cabolina Corporation Cote 

797. Service of l^:al prooesa upon inflnrance coaunissioner. 
The servfce of legal process upon any foreign insurance company, 
admitted and authorized to do husiuess in this state under the 
provisions of this chapter, shall be made by leaving the same in 
the hands or office of the insurance commissioner, and no service 
upon a company that is licensed to do business in this state is 
valid unless made upon the insurance commissioner, the general 
agent for service, or some officer of the company. As a condition 
precedent to a valid service of process and of the duty of the com- 
missioner in the premises, the plaintiff shall pay to the insurance 
commissioner at the time of service the sum of one dollar, vphich 
the plaintiff shall recover as taxable costs if he prevails in his 
action. In any action of which a justice of the .peace has Juris- 
diction, summons may be served on any licensed agent of such 
company, returnable in not less than ten days from date of serv- 
ice; if there is no such agent in the county, then the summons 
may Be served as provided for in other actions against foreign 
corporations in a court of a justice of the peace. 

C. 8., 8. 64Uj Eev., b. 4750; 1899, c. 54, bs. 16, 62; 1903, c, 438, b. 6. 

Insnnnce § 814. If a foreign corporation has not obtained a license, and 
ie not subject to thia fection it is subject to Consolidated Statutes, sectiona 
483, 1137, (herein 21 and S9) relating to foreign corporations in general. — 
Oliver v. United States Fidelity & Gnaranty Co., 174 N. C. 417, 93 S. E. 948. 

InsDi&nce g 626. Service of process on an insuianre company is not 
restricted to tlie method prescribed by this section but niay also be made in 
the manner prescribed by section 1137 (herein Sfl). — Pardue v. Absher, 174 
N. C. 676, 94 S. E. 414; Fisher v. Traders Mutual Life Ini. Co., 136 N. C. 
217, 48 8. E. 667. 

Insurance § 626. Where there has been no epeci£c finding by tho trial 
judge that defendant insurance company was licensed to do business 'within 
the state, it would be presumed, on appeal, in support of his determination 
that a service otherwise made was valid, that such was not the case- — 
W. P. Parker ft Co. v. Continental Ins. Co., 143 N. C. 839, 55 8. E. 717. 

Insuranca g6a6. In an action against a foreign fraternal insurance 
society doing business in this state, service of summons on the commissioner 
of insurance brings the corporation into court.— Brenizer v. Soyal Arcanum, 
141 N. C. 409, 5S 8. E. 835. 

Insurance § 626, Service of process on the state insurance commissioner 
is valid although the insurance company has not been domesticated. — 
Hinton v. Mutual. Eeserve Fund Ins. Co., 135 N, C. 314, 47 8. E. 474. 

798. Duty of commissioBer when served with process. When 
legal process, is served upon the insurance commissioner as attor- 
ney for a foreign company, under the provisions of thia chapter. 



North Cakouna Corporation Code 875 

he shall immediately notify the company of Bueh service by let 
ter prepaid and directed to its secretary, or in the case of a 
foreign coontry, to its resident manager, if any, in the United 
States ; and must within two days after such service forward in 
the same manner a copy of the process served on him to such 
secretary or manager, or to sneh other person previously desig- 
nated by the company by written notice filed in the office of the 
commissioner. The commissioner must keep a record of all such 
proceedings, which shall show the day and hour of service of 
the process on the commissioner. 

C. 8., B. 6415; Jtev., a. 47S1; 1S99, c. 54, s. 16. 

709. Action to enforce compliance with this chapter. Com- 
pliance with the provisions of this chapter as to deposits, obli- 
gations, and prohibitions, and the .payment of taxes, fines, fees, 
and penalties by foreign insurance companies, may be enforced 
in the ordinary course of legal procedure by action brought in 
the superior court of Wake county by the attorney-general in 
the name of the state upon the relation of the insurance commis- 
sioner. 

C. 8., 8. 6416; Bev., s. 4752; 1899, c. 54, 8. 102; 1903, e. 438, a. 10. 
ART. 16. REGULATION OP LIFE INSURANCE COMPANIES. 

800. Life insurance company defined; requisites of contract. 
All corporations, associations, partnerships, or individuals doing 
business in this state, under any charter, compact, agreement, or 
statute of this or any other state, involving the payment of 
money or other thing of value to families or representatives of 
policy and certificate holders or members, conditioned upon the 
continuance or cessation of human life, or involving an insurance, 
guaranty, contract, or pledge for the payment of endowments or 
annuities, or who employ agents to solicit business, are life in- 
surance companies, in all respects subject to the laws herein 
made and provided for the government of life insurance compa- 
nies, and shall not make any such insurance, guaranty, contract, 
or pledge in this state with any citizen, or resident thereof, which 
does not distinctly state the amount of benefits payable, the man- 
ner of payment, and the consideration therefor. 

C. 8., B. 6455; Rev., 8. 4773; ISSfl, c. 54, s. 55. 



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376 North Carolina Cmiporation Code 

have been approved by tbe inflnrance tommisaioner is held a rertrietioo ou 
the inauranee company and not on the eontract, and does not invalidate a 
policy (or less than that amount.— Blount v. Hoyal Fraternal Aas'n, 163 
N. C. 167, 79 8. E. 299. 



Insnrance §138. The provision that no life insurance company may 
afford any spefial favor or advantage in premium rates to or discriminate 
among ita policyholders, is a restriction applicable to the cotnpanyj and 
where the insured has, in good faith, entered into a policy contract with 
the company whereby he has seeured a policy at a reduced rate of premium, 
the parlies are not In pari delicto. — Robinson v. Security Life & Annuity 
Company, 163 N. C. 415, 79 8. E. 681. 

801. Foreign compaiues; reqnimnents for admission. A com- 
pany organized under the laws of any other of these United 
States for the transaction of life insurance may be admitted to 
do business in this state if it complies with the other provisions 
of this chapter regulating the terms and conditions upon which 
foreign life insurance companies may be admitted and authorised 
to do business in this state, and, in the opinion of the insurance 
commissioner, is in sound financial condition and has policies in 
force upon not less than five hundred lives for an aggregate 
amount of not less than five hundred thousand dollars. Any life 
company organized under the laws of any other country than the 
United States, in addition to the above requirements, must make 
and maintain the deposit required of such companies by article 
four of this chapter. 

C. S., s. 6456: Rev., s. 4774; 1899, c. 54, a. 56. 

802. SolicitinfT agent represents the company. A person who 
solicits an application for insurance upon the life of another, in 
any controversy relating thereto between the insured or his bene- 
ficiary and the company issuing a policy upon such application, 
is the agent of the company and not of the insured. 

C. S., B. 6457; 1807, c. 958, s. 1. 



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NOBTH CABOLINA COEPORATION CODE 377 

SUBCHAPTER HI. 
PBATEBNAL ORDERS AND SOCIETIES. 
ART. 17. FRATERNAL ORDERS. 

S03. General Insurance law not applicable. Nothing in the 
general insurance laws, except such as apply to fraternal orders 
or fraternal societies, shall be constnied to extend to benevolent 
associations, incorporated under the laws of this state that onl; 
levy an assessment on the members to create a fund to pay the 
family of a deceased member and make no profit therefrom, and 
do not solicit business through agents. Such benevolent asso- 
ciations providing death benefits in excess of three hundred dol- 
lars to any one person, or disability benefits not exceeding three 
hundred dollars in any one year to any one person, or both, shall 
be known as "fraternal benefit societies"; and those providing 
benefits of three hundred dollars or less shall be known as "fra- 
ternal orders." 

C. S., H. 6491; Rev., s. 4794; 1899, c. 54, e. 87; 1901, e. 70fi, s. 2; 1913, t. 4«. 

Insnruiea g 6B7. Fraternal insurance orders nrc auch ns mnke provision 
for aick and death beaefits and they arc subject to tbe same rules, reitula- 
tiong, and supervision as foreign insurance companies, when operstoil from 
beyond the state, e;icept that they are not required to mnke the deposit 
or have tbe paid up capital required of other companies. — State v. ArEing- 
ton, 157 N. C. 640, 73 S. E. 122. 

Instmmce §770. A member of a mutual benefit society may select any 
one SB his benoficiciary, unless restricted by the rules of tbe soeietv or by 
statute.— Pollock v. Household of Ruth, 150 N. C. 211, 63 S. E. 940. 



804. Fraternal orders defined. Every incorporated association, 
order, or society doing business in this state on the lodge system, 
with ritualistic form of work and representative form of govern- 
ment, for the purpose of making provision for the payment of 
benefits of three hundred dollars or less in case of death, sickness, 
temporary or permanent physical disability, either as the result 
of disease, accident, or old age, formed and organized for the 
sole benefit of its members and their beneficiaries, and not for 
profit, is hereby declared to be a "fraternal order." Societies 
and orders which do not make insnrance contracts or collect dues 
or assessments therefor, but simply pay burial or other benefits 
out of the treasury of their orders, and use their f^i^(|<i^)^^[c 



378 North Caeolina Coeporation Code 

purpose of building homes or asylums for the purpose of caring 
for aud educating orphan children and aged and infirm people in 
this state, shall not he considered as "fraternal oMers" or "fra- 
ternal benefit societies" under this subchapter; and such order 
or aasoeiation paying death or disability benefits may also create, 
maintain, apply, or disburse among its membership a reserve or 
emergency fund as may be provided in its constitution or by- 
laws ; but no profit or gain may be added to the payments made 
by a member. 

C. 8., B. 6492: Kev., b. 4795; 1899, c. 54, b. 83; 1901, c. 706, b. 3; 1907, p. 
938; 1913, o. 46. 

See Gay v. Woodmen o( World, 179 N. C. 210, 102 S. E. 195; HoUingsworth 
V, Supreme Council, Boval Arcanum, 175 N. C. 615, 96 S. E. 81; Brenizei 
V. Royal Arcanum, 1*1 N. C. 409, 53 S. E. 835. 

805. Ftrnds deri7ed from aasessments and dues. The fund 
from which the payment of benefits,. as provided for in the next 
preceding section, shall be made, and the fund from which the 
expenses of sueh association, order, or society shall be defrayed, 
shall be derived from assessments or dues collected from its mem- 
bers. Sueh societies or associations shall be governed by the 
laws of the state governing fraternal orders or societies, and are 
exempt from the provisions of all general insurance laws of this 
state, and no law hereafter passed shall apply to such societies 
unless fraternal orders or societies are designated therein. 

C. S., 8. 6493; fiev., a. 4796; 1899, c. 54, b. 89; 1901, c. 706, b. 2; 1913, c. 46. 
See Brenizer v. Royal Arcanum, 141 N. C. 409, 53 B. E. 835. 

806. Assessments and does; collection. Assessments and dues 
referred to in the two preceding sections may be collected, re- 
ceipted and remitted by a member or officer of any local or 
subordinate lodge of any fraternal order or society when so ap- 
pointed or designated by any grand, district or subordinate lodge 
or officer, deputy or representative of the same, there being no 
regular licensed agent or deputy of said grand lodge charged 
wJti. r-,-^ -V-'>s lui ai.y |!trrsr:. - oUecting said dues or assess- 
i\:-u\- -•.■A.\ 'II! tin- a^enl rPL.r--^.':::. tive of such fraternal order 
III ■■■.■VI--V cr n.-iV JeparriiifL! f';!'!. of, and shall bind them by 
iiie.t nl■■^ ;i, , iilie'"-![iL' hJiil rer;;i"!:: ? said amounts so collected. 
1 ^ <:■■• <:•< I .i:'-u\u>lt\nf^'.. 'fKn'-U'-— of any agreement, by-law, 
contract or notice, shall said officer or collector be the agent or 
representative of the individual member from whom any such 
collection is made ; nor shall said member be responsible for the 
failure of rflich oflScer or collector to safely keep, handle or remit 



NoBTH Carolina Corporation Code 379 

ttid does or asseasments bo collected, in accordance with the 
rales, regalatioas, or by-laws of said society; nor shall said 
member, regardless of any rules, regulations, or by-laws to the 
contrary, forfeit any rights under his certificate or membership 
in said fraternal benefit society by reason of any default or 
misconduct of any said officer or member so acting. 
C. S., 8. 6493-a; 1921, c. 139, s. 1. 

807. Meetings of governing body; principal ofiBce; separation 
of races. Any such society or order incorporated and organized 
under the laws of this state may provide for the meeting of its 
supreme legislative or govemiilg body in any other state, prov- 
bce, or territory wherein such society has subordinate lodges, 
and all business transacted at such meetings is as valid in all 
respects as if the meetings were held in this state ; but the princi- 
pal business office of such society shall always be kept in this 
state. No fraternal order or society or beneficiary association 
shall be authorized to do business in this state under the pro- 
visions of this article, whether incorporated under the laws of 
this or any other state, province, or territory, which associates 
with, or seeks in this state to associate with, as members of the 
game lodge, fraternity, society, association, the white and colored 
races with the objects and purposes provided in this article. 

C. S., H. 6494; Rev., b. 4797; 189S, c. 54, b. 91; 1S13, c. 46. ■ 

808. Conditions precedent to doing business. Any such fra- 
ternal, beneficiary order, society, or association as defined by 
this chapteV, chartered and organized in this state or organized 
and doing business under the laws of any other state, district, 
province, or territory, having the qualifications required of do- 
mestic societies of like character, upon satisfying the insurance 
eommissioner that its business is proper and legitimate and so 
conducted, may be admitted to transact business in this state 
upon the same conditions as are prescribed by this chapter for 
admitting and authorizing forei($n insurance companies to do 
business in this state, except that such fraternal orders shall not 
be required to have the capital required of such insurance com- 
panies. 

C. S., 8. 649G( Hev, a. 4798; 1899, c. 54, s. 92; 1901, c. 706, s. 2; 1903, e. 
438, g. 9; 1913, c. 46. 

809. Oertain lodge systems exempt. Beneficial fraternal orders, 
or societies incorporated under the lajvs of this state which are 
conducted under the lodge system, having tlie supreme lodge or 

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880 ' NoBTH Cabouna Corporation Code 

governing body located in this state, and so organized that the 
membership consists of members of subordinate lodges, and the 
sabordinate lodges accept for membership none but residents 
of the county in which such subordinate lodge is located, and 
each subordinate lodge issues certificates, makes - assessments, 
and collects a fund to pay benefits to the widows and orphans of 
its own deceased members and their families, each lodge, iude- 
pendently of the other, for itself, and independently of the 
supreme lodge, each lodge controlling the fund for this purpose, 
and in addition to the benefits paid by each subordinate lodge to 
its own members, the supreme lodge provides for an additional 
benefit for such of the members of the subordinate lodges as are 
qualified, at the option of the subordinate lodge member, and such 
organization is not conducted for profit, has no capital stock, 
and has been in operation for ten years in this state, sucb bene- 
ficial orders or societies shall be exempt from the requirements of 
this chapter, and shall not be required to pay any license tax 
or fees nor make any report to the insurance commissioner, unless 
the assessments collected for death benefits by the supreme lodge 
amount to at least three hundred dollars in one year. The 
insurance commissioner may require the chief or presiding officer, 
or the secretary, to file annually an afSdavit that such organiza- 
tion is entitled to this exemption, 
C. S., 8. 6496; ISn, c. 199. 

ART. 18. FRATERNAL BENEFIT SOCIETIES. 

810. Fraternal benefit society defined. Any corporation, 
society, order, or voluntary association, without capital atock, 
organized and carried on solely for the mutual benefit of its 
members and their beneficiaries, and not for profit, and having a 
lodge system with ritualistic form of work and representative 
form of government, and which makes provision for the payment 
of benefits as hereafter prescribed in this article, is declared to be 
a fraternal benefit society. 

0. 8., 8. 6*97j IMS, c. 89, i. 1. 

811. Lodge systom defined. A society having a supreme gov- 
erning or legislative body and subordinate lodges or branches, by 
whatever name known, into which members are elected, initiated, 
and admitted in accordance with its constitution, laws, rules, 
regulations, and prescribed ritualistic ceremonies, which subor- 
dinate lodges or branches are required by the laws of such 

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NMtTH CABOLIKA COEPORATION CWE 381 

society to hold regular or stated meetings at least onee in each 
month, is deemed to be operating on the lodge system. 
C. 8., B. 6498, 1913, c. 89, b. 2. 

812. BepresflDtatlve form of goTemmeot defined. A society is 
deemed to have a representative form of government when it 
provides in its constiution and laws for a supreme legislative or 
governing body, composed of representatives elected either by 
the members or by delegates elected directly or indirectly by the 
members, together with such other members as may be prescribed 
by its constitution and laws : Provided, that the elective members 
constitute a majority in number and have not less than two-thirds 
of the votes, nor less than the votes required to amend its con- 
stitution and laws ; and Provided further, that the meetings of the 
snprerae or governing body, and the election of officers, represen- 
tatives, or delegates, are held as often as onee in four years. The 
members, officers, representatives, or delegates of a fraternal 
benefit society shall not vote by proxy. 

C. S., H. 6499; 1913, c. 89, s. 3. 

813, Organization. 1. AppJiradon. Ten or more persons, 
citizens of the United States, and a majority of whom are citixens 
of this state, who desire to form a fraternal benefit society, as 
defined by this article, may make and sign (giving their ad- 
dresses) and actnowledge before some olBeer competent to take 
acknowledgment of deeds, articles of in^^orporation in which shall 
be stated : 

a. The proposed corporate name of the society, which shall not 
80 closely resemble the name of any society or insurance com- 
pany already transacting business in this state as to mislead the 
public or lead to confusion. 

b. The purpose for which it is formed — which shall not include 
more liberal powers than are granted by this article: Provided, 
that any lawful, social, intellectual, educational, charitable, benev- 
olent, moral, or religious advantages may be set forth among 
the purposes of the society — and the mode in which its corporate 
powers are to be exercised. 

c. The names, residences, and official titles of all the officers, 
trustees, directors, or other persons who are to have and exercise 
the general control and management of the affairs and funds of 
the society for the first year or until the ensuing election at which 
all such officers shall be elected by the supreme legislative or 
governing body, which election shall be held not later than c 



382 MOBTH CABOLINA CORPORATION CODE 

2. Papers and bond filed. Such articles of incorporation and 
duly certified copies of the constitution and laws, rules and regu- 
lations, and copies of all proposed forms of benefit certificates, 
applications therefor, and circulars to be issued by such society, 
and a bond in the sum of five thousand dollars, with sureties ap- 
proved by the insurance commissioner, conditioned upon the 
return of the advance payments, as provided in this section, to 
applicants, if the organization is not completed within one year, 
shall be £led with the insurance commissioner, who may require 
such further information as he deems necessary. 

3. Preliminary license. If the purposes of the society conform 
to the requirements of this article, and all provisions of law have 
been complied with, the insurance commissioner shall so certify 
to the secretary of state, and upon his issuing the articles of in- 
corporation shall furnish the incorporators a preliminary license 
authorizing the society to solicit members as hereinafter pro- 
vided. 

4. Coniplelion of organization. Upon receipt of such license 
from the insurance commissioner the society may solicit members 
for the purpose of completing its organization, and shall collect 
from each applicant the amount of not less- than one regular 
monthly payment, in accordance with its table of rates as pro- 
vided by its constitution and laws, and shall issue to each ap- 
plicant a receipt for thfi amount so collected. But no such 
society shall incur any liability other than for such advanced 
payments, nor issue any benefit certificate nor pay or allow, or 
offer or promise to pay or allow, to any person any death or 
disability benefit until actual bona fide applications for death 
benefit certificates have been secured upon at least five hundred 
lives for at least one thousand dollars each, or the largest amount 
written on any one person, and all such applicants for death 
benefits shall have been regularly examined by legally qualified 
practicing physicians, and certificates of such examinations have 
been duly filed and approved by the chief medical examiner of 
such society; nor until there shall be established ten subordinate 
lodges or branches into which said five hundred applicants have 
been initiated; nor until there has been submitted to the in- 
surance commissioner under oath of the president and secretary, 
or corresponding officers of such society, a list of such applicants, 
giving their names, addresses, date examined, date approved, 
date initiated, name and number of the subordinate branch of 

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NOBTR CABOLINA COBPORATION CODE 383 

irhicli each Applicant is a member, amount of benefits to be 
panted, rate of stated periodical contributions, which shall be 
nfficient to provide for meeting the mortuary obligation con- 
tracted, when valued for death benefits upon the basis of the 
national fraternal congress table of mortality, as adopted by the 
n&tional fraternal congress, August twenty-third, one thousand 
eight hundred and ninety-nine, or any higher standard, at the 
option of the society, and for disability benefits by tables based 
npon reliable experience, and for combined death and permanent 
total disability benefits by tables based upon reliable experience, 
with an interest assumption not higher than four per cent per 
annum; nor until it shall be shown to the insurance commissioner 
by the sworn statement of the treasurer, or corresponding officer 
of such society, that at least five hundred applicants have each 
paid in cash at least one regular monthly payment as herein pro- 
vided per one thousand dollars of indemnify to be effected, which 
payments in the aggregate shall amount to at least twenty-five 
hundred dollars. Such advanced payments shall be credited to 
the mortuary or disability fund on account of such applicants, 
and no part thereof may be used for expenses, but such pay- 
ments shall be held in tnist and returned to the applicants if 
the organization is not completed within one year as hereinafter 
provided. 

5. License isstied. The insurance commissioner may make such 
eiamination and require such further information as he deems 
advisable, and, upon presentation of satisfactory evidence tbat 
the society has complied with all the provisions of law, he shall 
issue to such society a certificate or license to 'that effect. Such 
certificate shall be prima faeie evidence of the existence of such 
society at the date of such certificate. 

6. One-year limit. No preliminary certificate or license granted 
under the provisions of this section shall be valid after one year 
from its date, or after such further period, not exceeding one year, 
as may be authorized by the insurance commissioner, upon cause 
shown, unless the five hundred applicants herein reqtiired have 
been secured end the organization has been completed as herein 
provided; and the articles of incorpration and all proceedings 
thereunder shall become null and void in one year from the date 
of such preliminary certificate, or at the expiration of such ex- 
tended period, unless the society shall have completed its orgaui- 
£ELtion and commenced business as herein provided. 

7. Discontinuance. When any domestic society shall have d^-yL- 



384 NOBTH CABOLINA CORPORATION CODE 

continued business for the period of one year, or ,bas less than 
four hundred members, its charter shall become null and void. 
C. 8., s. 6500; 1913, c. 89, a. 11. 

814. Constitation and by-laws. Each society shall have power 
to make a constitution and by-laws for the government of the 
society, the admission of its members, the management of iti 
affairs, and th'e fixing and readjusting of the rates of contributiOQ 
of its members from time to time; it shall have the power to 
change or amend such constitution and by-laws, and it shall have 
such other powers as are necessary and incidental to carrying into 
effect the objects and purposes of the society. 

C. 8., 8. 6501; 1913, c. 89, a. 11. 

816. Amendments to conatitutlon and by-laws. Every society 
transacting business under this article shall file with the in- 
surance commissioner a duly certified copy of all amendments of 
or additions to its constitution and laws within ninety days after 
the enactment of the same. Printed copies of the constitution and 
laws as amended, changed or added to, certified by the secretary 
or corresponding officer of the society, shall he prima facie evi- 
dence of the legal adoption thereof. 

C. S., 8. 6502; 1913, c. 89, s. 19. 



816. Waiver of the provisions of the laws. The constitution and 
laws of the society may provide that no subordinate body, nor 
any of its subordinate officers or members, shall have the power 
or authority to waive any of the provisions of the laws and con- 
stitution of the society, and the same shall be binding on the 
society and each and every member thereof, and on all benefi- 
ciaries of members, 

C. S., 3. 8503; 1913, «. 89, s. 17. 

817. Place of meeting; location of office. Any domestic society 
may provide that the meetings of its legislative or governing 
body may be held in any state, district, province, or territory 
wherein such society has subordinate branches, and all business 
transacted at such meetings shall be as valid in all reapeeta as 
if such meetings were held in this state ; but its principal office 
shall be located in this state. 

C. S., 9. 6504; 1913, c. 89, a. 13. D.^izcdbvCoO^ilc ' 



NOBTH Cabolina Corpobation C(n>E 386 

818. Mo personal liabUi^ for benefits. Officers and members 
ot the supreme, grand, or any subordinate body of any such in- 
corporated society shall not be individually liable for the ^pay- 
ment of any disability or death benefit provided for in the laws 
aod agreements of such society; but the same shall be payable 
only out of the funds of such society and in the manner provided 
by its laws. 

C. S., 1. 6505; 1913, c. 8S, a. 16. 

819. Qoaliflcations for membership. Any society may admit 
to beneficial membership any person not less than sixteen and 
not more than sixty years of age, who has been examined by a 
legally qualified physician, and whose examination has been 
supervised and approved in accordance with the laws of the 
society: Provided, that any beneficiary member of such society 
who shall apply for a certificate providing for disability benefits 
need not be required to pass an additional medical examination 
therefor. Nothing herein contained shall prevent such society 
from accepting general or social members. 

C. 8., a. 6506; 1913, c 89, s. 6. 

820. Benefits. 1. Every society transacting business under 
this article shall provide for the payment of death benefits, and 
may provide for the payment of benefits in ease of temporary 
or permanent physical disability, either as the result of disease, 
accident, or old age: Provided, the period of life at which the 
payment of benefits for disability on account of old age shall 
commence shall not be under seventy years, and may provide for 
monuments or tombstones to the memory of its deceased member*, 
and for the payment of funeral benefits. Such society shall have 
the power to gi\e a member, when permanently disabled or on 
attaining the age of seventy, all or such portion of the face value 
of his certificate as the laws of the society may provide; but 
nothing contained in this article shall be so construed as to pre- 
vent the issuing of benefit certificates for a term of years less 
than the whole of life, which are payable upon the death or dis- 
ability of the member occurring within the term for which the 
benefit certificate may be issued. Such society shall, upon written 
application of the member, have the power to accept a part of 
the periodical contributions in cash, and charge the remainder, 
not exceeding one-half of the periodical contribution, against the 
certificate, with interest payable or compounded annually at a 
rate not lower than four per cent per annum; but this P''i^il^BS-,Q|p 



386 North Carolina Corporation Code 

shall not be granted except to societies which have readjiisted or ' 
may hereafter readjust their rates of contribution, and to con- 
tracts affected by auch readjustment. 

2. Any society which shall show by the annual valuation here- 
inafter provided for that it is accumulating and maintaining the 
reserve not lower than the usual reserve computed by the Ameri- 
can experience table and four per cent interest may grant to its 
members extended and paid-up protection, or such withdrawal 
equities as its constitution and laws may provide ; but such granta 
shall in no case exceed in value the portion of the reserve to tbe 
credit of such members to wliom they are made. j 

C. B., B. 6507; 1913, e. 89, a. 4. 

821. Beneficiaries. The payment of death benefits shall be 
confined to wife, husband, relative by blood to the fourth degree, 
father-in-law, mother-in-law, son-in-law, daughter-in-law, step- 
father, stepmother, step-children, children by legal adoption, or to 
a person or persons dependent upon the member; but if after 
the issuance of the original certificate the members shall become 
dependent upon an incorporated charitable institution, he Bhall 
have tbe privilege, with the consent of the society, to make such 
institution his beneficiary. Within the above restrictions each 
member shall have the right to designate his beneficiary, and, 
from time to time, have the same changed in accordance with tbe 
laws, rules or regulations of the society, and no beneficiary shall 
have or obtain any vested interest in such benefit until the same 
has become due and payable upon the death of the metaber. Any i 
society may, by its laws, limit the scope of beneficiaries within | 
the above classes. j 

C. S., a. 6508; 1913, c. S9, a. o. 

822. Benefit certificates. Every certificate issued by any such 
society shall specify the amount of benefit provided thereby, and 
shall provide that the certificate, the charter, or articles of incor- 
poration or, if a voluntary association, the articles of association. 
the constitution and laws of the society, and the application for 
membership and medical examination, signed by the applicant, 
and all amendments to each thereof, shall constitute the agree- 
ment between the society and the member ; and copies of the same 
certified by the secretary of the society, or corresponding ofilcer, 
shall be received in evidence of the terms and conditions thereof- 
Any changes, additions, or amendments to the charter or articles 
of incorporation, or articles of association if a voluntary associa- 



NoBTH Carolina Cobfobation Code 387 

tion, conatitution or lawa duly made or enacted Bubaequent to the 
iBSuance of the benefit certificate, shall bind the member and his 
beneficiaries, and shall govern and control the agreement in all 
respects the same as though such changes, additions, or amend- 
ments had been made prior to and were in force at the time of the 
application for membership. 

C. a, a. 6S09; 1913, e. 89, 8. 7. 

823. Benefits not subject to debts. No money or other benefit, 
charity or relief or aid to be paid, provided, or rendered by any 
such society shall be liable to attachment, garnishment, or other 
process, or be seized, taken, appropriated, or applied by any legal 
or equitable process or operation of law to pay any debt or lia- 
bility of a member or beneficiary or any other person who may 
have a right thereunder, either before or after payment, 

C. 8., 8. 6510; 1913, c. 88, 8. 18. 

824. Fnnda provided. 1. Any society may create, maintain, 
invest, disburse, and apply an emergency, surplus, or other isimilar 
fund in accordance with its laws. Unless otherwise provided in 
the contract, such funds shall be held, mvested and disbursed for 
the use ^nd benefit of the society, and no member or beneficiary 

' shall have or acquire individual rights therein or become entitled 
to any apportionment or the surrender of any part thereof, except 
as provided in subsection two of section 6507 (herein 820). The 
funds from which benefits shall be paid and the funds from which 
the expenses of the society shall be defrayed shall be derived from 
periodical or other payments by the members of the society and 
accretions of said funds. But no society, domestic or foreign, 
shall hereafter be ineorporattd or admitted to transact business 
in this state which does not provide for stated periodical con- 
tributions sufficient to provide for meeting the mortuary obliga- 
tions contracted, when valued upon the basis of the national 
fraternal congress table of mortality as adopted by the national 
fraternal congress, August twenty-third, one thousand eight hun- 
dred and ninety-nine, or any higher standard, with interest as- 
sumption not more than four per cent per annum, nor write or 
accept members for temporary or permanent disability benefits 
except upon tables based upon reliable experience, with an 
interest assumption not higher than four per cent per annum. 

2, Deferred payments or installments of claims shall be con- 
sidered as fixed liabilities on the happening of the contingency 
upon which such payments or installments are thereafter to be r 



388 North Carolina Corporation Code 

paid. Sueh liability shall be the preeent value of such future 
payments or install men ta upon the rate of interest and mortality 
assumed by the society for valuation, and every society shall main- 
tain a fund sufficient to meet such liability regardless of proposed 
future collections to meet any such liabilities. 

C. S., a. 6511; 1913, c. 89, a. 8. 

826. lovestment of fands. Every society shall invest its funds 
only in securities permitted by the laws of this state for the in- 
vestment of the assets of life insurance companies: Provided, 
that any foreign society permitted or seeking to do business in 
this state, which invests its fund^ in accordance with the laws of 
the state in which it is incorporated where it has such laws, shall 
be held to meet the requirements of this article for the investment 
of funds, 

C. S., B. 8512; 1913, c. 89, B. 9. 

826. Application of funds. Every provision of the laws of the 
society for payment by its members, in whatever form made, shall 
distinctly state the purpose of the same and the proportion 
thereof which may be usei^ for expenses, and no part of the money 
collected for mortuary or disability purposes or the net accre- 
tions of either or any of said funds shall be used for expenses. 

C. S., 8. e513( 1913, e. 89, a. 10. 

827. Powers of existing societies retained; reincoirponitioii. 
Any society now engaged in transacting business in this stale 
may exercise, after the passage of this article, all of the rights 
conferred thereby, and all the rights, powers, and privileges now 
exercised or possessed by it under its charter or articles of in- 
corporation not inconsistent with this article, if incorporated ; or, 
if it be a voluntary association, it may incorporate hereunder. 
But no society already organized shall be required to reincor- 
porate hereunder, and any such society may amend its articles of 
incorporation from time to time in the manner provided by law. 

C. S., B. 6514; 1913, c. 89, a. 12. 

828. Mergers and transfers. No domestic society shall merge 
with or accept the transfer of the membership or funds of any 
other society unless such merger or transfer is evidenced by s 
contract in writing, setting out in full the terms and conditions 
of such merger or transfer, and is filed with the insurance com- 
missioner of this state, together with a sworn statement of the 
financial condition of each of the societies, by its president and ' 
secretary or corresponding officers, and a certificate duly verified 



NoETH Carolina Corporation Code 389 

under oath of said officers of each of the contracting societies that 
such merger or transfer has been approved by a vote of two- 
thirds of the members of the supreme legislative or gOTeming 
body of each of the societies. 

Upon the submission of such contract, financial statements, and 
certificates, the insurance commissioner shall examine the same, 
and if he shall find such fiuancial statements to be correct and 
the contract to be in conformity with the provisions of this sec- 
tion, and that such merger or transfer is just and equitable to the 
members of each of the societies, he shall approve the merger or 
transfer, issue hie certificate to that effect, and thereupon the 
contract of merger or transfer shall be of full force and effect. 

In ease such contract is not approved, the fact of its submission 
and its contents shall not be disclosed by the insurance commis- 
sioner. 

C. S.,'8. 6515; 1913, c. 8&, b. 13. 

829. Annual license. Societies authorized to transact businesa 
in this state may have their authority renewed annually, but in 
all cases to terminate on the first day of the succeeding April; 
and the license shall, upon payment of license fee, continue in full 
force and effect until the new license is issued or specifically re- 
fused. For each license or renewal the society shall pay the in- 
surance commissioner twenty-five dollars. A duly certified copy 
or duplicate of such license shall be prima facie evidence that the 
licensee is a fraternal benefit society within the meaning of this 
article. 

C. S., a. 6516; 1913, c. 89. b. 14, 

830. Accident societlea may be licensed. Any fraternal benefit 
society heretofore organized and incorporated, and operating 
within the definition set forth in this article, providing for benefits 
in ease of death or disability resulting solely from accidents, but 
which does not obligate itself to pay death or sick benefits, may 
be licensed under the provisions of this article, and shall have 
all the privileges and be subject to all the provisions and regula- 
tions of this article, except the provisions requiring medical exam- 
inations, valuations of benefit certificates, and that the certificate 
shall specify the amount of benefits. 

C. S., 8. 6517; 1913, c. 89, e. 27. 

831. Certain societies not included. Nothing contained in this 
article shall be construed to affect or apply to societies which 
limit their membership to any one hazardous occupation, nor ti 



'o\\slc 



390 North Carolina CkiRPORATioN Code 

similar societies which do not issue insurance certificates, nor to 
an association of local lodges of a society now doing business m 
this state which provides death benefits not exceeding five hun- 
dred dollars to any one person or disability benefits not exeeeding 
three hundred dollars in any one year to any one person, or both, 
nor to any contracts of reinsurance business on such plan in this 
state, nor to domestic societies which limit tjieir membership tn 
the employees of a particular city or town, designated firm, busi- 
ness house, or corporation, nor to domestic lodges, orders, or 
associations of a purely religious, charitable, and benevolent 
description, which do not provide for a death benefit of more than 
one hundred dollars, or for disability benefits of more than ont 
hundred and fifty dollars to any one person in any one yets- 
The insurance commissioner may require from any society audi 
information as will enable him to determine whether such society 
is exempt from the provisions of this article. 
C. S., 8. 6618; 1913, c. 8B, a. 26. 

832. Eeports to insurance commiBsioner. 1. Annual report. 
Every society transacting business in this state shall annually, 
on or before the first day of March, file with the insurance com- 
missioner, in such form as he may require, a statement, under 
oath of its president and secretary or corresponding ofGcers, o! 
its condition and standing on the thirty-first day of December 
nest preceding, and of its transactions for the year ending on 
that date, and also shall furnish such other information as the 
commissioner may deem necessary to a proper exhibit of ib 
business and plan of working. The commissioner may at other 
times require any further statement he may deem necessary to hf 
made relating to such society. 

2. Vahiation of certificates. In addition to the annual report 
herein required, each society shall annually report to the com- 
missioner a valuation of its certificates in force on December 
thirty-first, last preceding, excluding those issued within the year 
for which the report is filed, in cases where the contributions for 
the first year in whole or in part are used for current mortalilj 
and exf>enses: Provided, the first report of valuation shall be 
made as of December thirty-first, one thousand nine hundred and 
twelve. Such report of valuation shall show, as contingent lia- 
bilities, the present mid-year value of the promised benefits pro- 
vided in the constitution and laws of such society under certil- 
icates then subject to valuation; and as contingent assets, the 
present mid-year value of the future net conributions proivided in 



North Cabolina Cospobation Code S91 

tbe constitution and laws aa the same are in practice actually 
collected. At the option of any society, in lieu of the above, the 
valuation may show the net value of the certificates subject to 
valuation hereinbefore provided, and the net value, when com- 
puted in case of monthly contributions, may be tbe mean of the 
terminal values for the end of the preceding and of the current 
insurance years. 

3. YaJiiafwjt aarfHained. Such valuation shall be certified by 
a competent accountant or actuary, or at the request and expense 
of tbe society, verified by the actuary of the department of in- 
surance of the home state of the society, and shall be filed with 
the commissioner within ninety days after the submission of the 
last preceding annual report. The legal minimum standard of 
valuation for all certificates, except for disability benefits, shall be 
the. national fraternal congress table of mortality aa adopted by 
the national fraternal congress, August twenty-third, one thou- 
sand eight hundred and ninety-nine, or, at the option of the socie- 
ty, any higher table; or, at, its option, it may use a table based 
upon the society's own experience of at least twenty years and 
covering not less than one hundred thousand lives with interest 
assumption not more than four per centum per annum. Each such 
valuation report shall set forth clearly and fully the mortality 
and interest basis and the method of valuation. Any society pro- 
viding for disability benefits shall keep the net contributions for 
such benefits in a fund separate and